The mutual fund industry is cribbing about there being no investments. Of course there are no investments. The industry has spent all its time pampering, requesting, cajoling the distributor. They have no direct communication with the investor.

Do the fund houses need the distributor? Yes. What a tight situation, is it not?

Has any fund house tried doing investor meets asking their distributors to be a part of it? Yes if the distributor has taken the initiative. Have fund houses done it on their own? No, the answer is no.

Are there enough distributors left in the business to help the industry grow at say 20% p.a.? NO. You have to be joking even contemplating such a question.

But banks are selling mutual funds, and they are all over the place, are they not?

Well, well.

Hdfc bank, Icici bank, Axis bank, State Bank of India are all banks which are selling mutual funds. Does it require a rocket scientist to know what funds these banks are selling? Are they selling the best performing funds? Are they selling what the client needs? Well no comments.

Are they selling what is good for the bank or what is good for the clients? Well go and see the collection of their life insurance arms – and you will know the answer.

That brings us down to the IFAs who do not have an insurance selling license (largely the assumption that a distributor will do what is good for himself – not tested, but easy to believe is easy to make too!) are the only ones selling mutual funds. The fund industry itself is not growing, nor is the concentration growing. I do not have adequate research abilities, but the top 4-5 fund houses (in terms of equity assets, not total assets) have upwards of 70% of the equity assets – and this ratio has not changed for the past few years. Thus the big is getting bigger ….is also not true.

The number of SIPs that the industry is flaunting is 55 lakh monthly SIPs. If this has the same distribution as the equity assets, again the top few houses have 70% of the SIPs. The average monthly SIP amount is Rs. 2500, but the bigger houses may have a higher average too – not sure.

If the number of distributors have fallen who is going to tell the investor – start early, believe in compounding, stay during the bad times, ….etc.? Well nobody I guess.

What will happen to expiring SIPs …well they will expire and may not be renewed. Banks are not interested in selling longer SIPsĀ  – they normally sell for a year at max.

Will the number of SIPs increase? Will the average SIP per month increase? Will more people come into the industry as an investor?

No clue.

All the best is what I can say – to the investor, distributor and the investor. Just remember you are sitting on a ROUND TABLE – nobody knows who is on whose side. Only thing we know is we are on opposite sides!!

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  1. Subra,

    Excellent article. Loved the thought about round table – lol.

    However, I know for sure HDFC bank does sell a large number of mutual fund through it online platform. I use it.

  2. So, is the 55 lakh monthly SIP’s same as 55 lakh investors? I ask this question because i myself and few other people (whom i think i have influence over, like my sisters husband, wife’s brother and have been able to convince them to do SIP’s) each have 3-5 SIP’s in different schemes.

    If most people doing SIP’s are of the similar taste and have an average of 3 SIP’s each. So, are we talking about just 18.3 lakh SIP investor’s in a country of India’s size ?

    Regards
    Raja

  3. nice try Raja! first of all in India there is no authentic mutual fund data. So 55 lakhs is a number which subra must have got from some fund house. Also 2500 is a nice guess work, to the extent of my knowledge says.

    you could be right about the number of investors doing SIP. However 18 lakh SIP investors is not bad in a country where if you do a sincere count you may find only 10 lakh TOTAL investors in mutual funds. And falling.

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