The IFA as referred to in this article has an AUM less than Rs. 50 crore and in MF parlance a ‘small IFA’ . This article does not apply to the big IFA who have more than Rs. 250 crores AUM and can get any AMC to bend any rule to accomodate them.
Let us look at their problems:
- The client has very little respect for them and think of them as people who are there to choose some scheme, fill the form, and do the execution of the transaction.
- The client has very little conversation with him/her and treats them like an errand boy.
- Big national distributors who cannot spend time and effort on clients who are small (read AUM 10L Rs.) hate these IFA
- Big national aggregators make these guys their employees, and try to increase the AUM
- One new way of increasing AUM is by stealthly changing from dividend plan to growth plan…etc. and change the ARN code
- Do clients understand the stealth of big national distributors? No.
- One big wealth manager is also a RIA and executes through his own private limited company..
- One ND and one bank – data aggregation is their job – happily help in the ARN change business!
Who is going to hurt the IFA? THE big IFA, the consolidating IFA, the aggregators, the national distributors, banks….threat can come from anywhere. What really happens?
A big distributor approaches a client and says “we are a big company and can give you a very comprehensive service – taxation, one screen view, E- transactions, ….etc…etc…”
The client is smart but is NEVER shown the full picture and he/she signs the documents. Is it easy to change the ARN ? yes. All they have to do is do a transaction like changing the option from dividend pay out to growth or something like that..and hey Presto! its done.
Is it common? YES.
Each fund house does not less than 15-20 transactions a DAY.
For some consolidators….it is the MAIN job.
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