The banning of upfront trail and reducing margins are likely to drive out a lot of small IFA from this business. Sounds depressing? well don’t be depressed. This will actually cause aggregation like nothing else. Already 2 big distributor aggregators are like the tail wagging the dog.

Is it possible for a small mutual fund (and serious about the business) to work without going to the big aggregator(s)? or ignore some of the top banks? It is possible, but the pain will be felt. Look at Quantum – where is the growth?

So are the number of IFA not growing? well surprisingly, it is growing, albeit at a slow pace. Who should be creating them? Amfi -as people believe that amfi is here to grow the industry. I have not seen any Amfi initiative (ever) to grow the number of advisers. It has always been some entreprenurial amc which has taken on this mandate and achieved it. I remember that I have done more than 100 training sessions in Mumbai (Franklin Templeton) and all over India (for Icici Prudential) for creating new IFA. No, all amc did not put in the same effort – some worked harder than the others.

Now 2 big distributor aggregators are doing a commendable job of increasing the number of people selling mutual funds. How can you grow a business without increasing the feet on street? and penetrate it to all the pincodes in the postal directory?

Perhaps the regulator also wants that. They will want a few aggregators who will do all the admin on part of the mutual fund. Imagine one MF with a Mumbai office trying to reach the physical forms (80 km from Baroda a small auto driver is not going to use the internet). It just cannot work. So these aggregators send their people to gardens, to market places, etc. USE SIMPLE LANGUAGE, and implement a simple task – of creating more agents. Believe me, all mutual fund CEO will talk about rural penetration, financial inclusion (the regulator breathes this)…but it is just 2 aggregators – profit driven bodies – who are really doing this. Gujarat is a great example of how many new IFA are being created – it is almost exclusively by these aggregators.

Are they benefiting by doing this? Fairly obviously. Who is the real beneficiary? It is the small fund house who cannot afford to build such a big network on their own. They cannot. Good win-win.

They are creating money earning opportunities for the young rural youth and the semi urban youth.

Hats off to both the aggregators. I have worked with both of them. Just last week for the second aggregator – and I hope to do lot more workshops with them.

Maybe this is good for the regulator too – it is easy to deal with 5 aggregators instead of working with 13000 IFA (less than that pay Income tax, so i am assuming that only so many of them are serious).