The way the media is talking about the mutual fund distributor, the common man must be thinking that the IFA or the ‘agent’ as is generally known must be a big, rich guy, right?


Most, if not all are agents by force. The financial service industry is very class conscious and recruits only MBAs and CAs as employees. So many people who are not that smart or lucky still need to make a career, right?

So some cousin, professor, neighbor, friend tells them about this great career of becoming an agent. This guy then writes a couple of exams (spending his own money, usually) and becomes an agent. Once he becomes an agent he tries to empanel himself with mutual funds. OMG the class consciousness comes into play again. A few funds will welcome him, but the big high and mighty fund houses in Granite offices with glass and aluminium will not empanel him. So he then goes to some aggregator like NJ Funds, Kotak, JM, RR, Bajaj capital and becomes a ‘sub-broker’ or a sub-agent.

Let us assume, he starts of his business and sells a few funds. For a second let us assume that all the business is with one or 2 fund houses – so that he gets some visibility at least in the fund house.

If he mobilises Rs. 100,000 he gets Rs. 400 for that application. Let us assume that he mobilises each application of Rs. 100,000 (not easy unless you have a million dollar Rollodex!!).

Assuming that he mobilises one application every 3 days (again horridly tough numbers, unless your whole family is wanting you to be in that business, and you have a big family)…this means he will mobilise 10 applications a month..or let us say 100 applications a year * 100,000 = Rs. 10 million. 

Commission earned on this: Rs. 40,000.  – in a year. GROSS. Assuming he stays with his parents, father pays his cell phone bill, travel costs, etc.

Even if he has done his MBA from a D- school and gets a job he can get a job in some B- company for Rs. 25,000 a month.

So what happens he DOES not become an agent. How many agents are there in India now? Not more than 30,000 agents who have complied with KYD. How many of them are active 10,000 (my guess could be ridiculously wrong). Active means they get at least ONE cheque in 6 months from any ONE fund house.

Media loves bashing, and this weakest link in the chain is the easiest to bash.

All Sebi has to do is to say:

a) banks and NLD (national level distributors) will get UPFRONT commission only on the NET amount mobilised (money brought in MINUS money taken out) – and this will be done by the registrars by creating some mechanism.

b) Distributors more than 5 years old (or aum in excess of Rs. 50 crores) will also be subject to this condition.

c) other distributors will also be subject to this – but on a quarterly basis.

d) monitoring could be left to Cams / Karvy – and the others

Already there is a shortage of agents – and Sebi is making that breed vanish.

Will I write ‘Here lies IFA…..’ May God bless his soul…..Rest in Peace..circa 2016?

Only IFA galaxy,, Ramesh Bhatt can answer this question!!

PS: I did not mention our Regulator because he thinks  this guy should start the conversation by saying “Sir, I am a professional. I will give you life planning Family Solutions for your family, and for this you need to pay me Rs. 25,000 and then i will tell you where to invest”.

Chances are he will go out before he can finish his statement.

Have not mentioned trail commission. Trail makes sense only and only if there is an AUM of about Rs. 10 crores…so give this kid 7 years of hard work …..

Are there distributors going around in Merc, BMW, and leading a lavish lifestyle. Looking at them and saying ‘average distributor is like looking at Rajnikant and saying ‘It is profitable to be in the film industry’.

When you look at the film industry, look at the 499,999 Rajni look alikes who make a living imitating Rajni.

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  1. I am reminded of my IFA who has always guided me with good and decent advice. He never pushed any ULIPs to us. He has urged us to take medical insurance twice. Whenever I start a SIP, he has always come to our house and promptly filled the documents. My monthly SIP investment through him is hardly about Rs.6000. I even asked him last time if I can pay him anything extra for conveyance/documentation work. But he refused. May the IFAs (the honest ones) live long and prosper.

  2. he might be doing it out of love or charity, but as a professional the financials do not make any sense…

  3. “Are there distributors going around in Merc, ….
    When you look at the film industry, look at the 499,999 Rajni look alikes who make a living imitating Rajni.”

    Awesome knack of hitting the nail on it’s head!! Kudos!!

    Lot’s of guesstimate statistics though! thinking about your satyamev jayate post. Chuckle chuckle… 🙂

  4. Shankar,

    a guy gets paid for a) competence and b) service. Sadly there are many who are competent and can do a strategic advise for you, but not too keen to fill the form ..etc. and there are many who have no great competence but will copy somebody while doing all the paper work.

    A guy who is c and renders service will want to make some money out of you, unless he is convinced that you will be his client for at least 5-10 years…

    a model has to be worthwhile for the customer and make some money for the distributor, or he will HAVE TO GO out of business.

    Yes guesstimates in my article – but there is just no source of authentic data. Sad, but true.

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