Advisor Speak 24th Sep 2012
FIFA gets off to a cracking start
Dhruv Mehta, Chairman, Foundation of IFAs (FIFA)


In less than a year since FIFA was set up, its off to a cracking start. If engaging with stakeholders is one of the primary objectives of any trade association, FIFA perhaps scores a perfect 10 in terms of the way it has engaged with AMFI, SEBI and MoF in putting forth its thoughts and recommendations and in giving constructive feedback to the powers that be. If a national footprint is a key priority for an IFA association to be taken seriously by regulators, FIFA has begun its journey well - with over 100 members from 15 cities joining it in its first year. Dhruv takes us through the breadth of initiatives that FIFA has been involved in its first few action packed months. The road ahead for FIFA will be an increasing focus on sharing of best practices and knowledge initiatives - initiatives in which Wealth Forum will be working closely with FIFA.

WF : When FIFA was incorporated in Feb 2012, the popular perception was that it is an association of a few large Mumbai based IFAs. How has your membership grown over the last six months?

Dhruv : The initial spadework for FIFA was done by a few of us in Mumbai, who believed very strongly in the need for all serious and committed IFAs across the country to come together onto a common association. Since the initial signatories of the Memorandum and Articles of Association were from Mumbai, the impression you speak of may have been gathered. We are not even a 1 year old association, but we already have over 100 members from 15 cities across India. With the growing pan-India membership base, our Board also reflects the change, with Board members now from 4 cities across India - Mumbai, Delhi, Kolkata and Bangalore. In addition, we have the Insurance & Investment Advisors Association Indore as an association member of FIFA.

We recognize that we have only just started the journey, and our endeavor will be to continue to reach out to all serious and forward looking IFAs and IFA associations and find ways in which we can come together, collaborate, share best practices and help each other serve our clients better and thus become more successful ourselves. I have said this before and I say this again : our business models may vary, but the one thing all committed and forward looking IFAs have in common is that we place the interests of our investors right in the center, and everything else around it. As long as that common thread exists, we can find ways of sharing best practices and helping each other serve their own clients better.

WF : Ever since FIFA was in its formative stages, regulatory events have overtaken the industry and have become the focal point of most business discussions. In what ways has FIFA represented the IFA's perspective to the powers that be?

Dhruv : You are right - we never imagined that we will be spending so much time on discussions and representations on regulations. It has been quite a hectic time for us, with so many things happening. Let me give you a run down on all our interactions at various levels on regulatory matters.

  1. Interaction with the Ministry Of Finance

  2. As you are aware, the Ministry of Finance was directed by the PM to determine and take urgent steps to revitalise the fortunes of the mutual fund industry. With this agenda, the finance ministry held a meeting on the 2nd of July 2012, where the invitees were The Executive Director of SEBI, the CEO's of the top ten Asset Management Companies, The CEO of the Association of Mutual Fund s Of India (AMFI) and two members from the Foundation Of Independent Financial Advisors (FIFA) as representatives of the entire distribution and IFA community. The agenda was to discuss steps to be taken to revatilise the Indian Mutual Fund Industry. The meeting was chaired by Shree R. Gopalan, Secretary, Economic Affairs, Ministry of Finance. Views and responses of various stakeholders including AMFI, AMC's, Investors, Distributors and IFAs across the country were taken and representation was made to the finance ministry. On the issues concerning Mutual Funds, raised for discussions by the Finance Ministry, FIFA has submitted its detailed views and submitted its recommendations for the development of Industry and promote the channelisation of household savings to the productive sectors of the economy. This meeting was followed by another meeting on the 12th of July 2012 to finalise the steps to re-energise Indian Mutual Fund Industry. The focus of discussions during this meeting was on discussing ways to create a vibrant distribution and advisory network so essential for widespread retail penetration especially in Tier 2 & 3 cities. FIFA contributed constructively in these discussions and deliberations leading to significant policy changes. FIFA expects to continue to play a constructive role in the development of balanced policy frameworks for the development of industry, retail penetration and financial inclusion and better investor outcomes.

  3. Interaction with SEBI

  4. SEBI had released a draft concept paper on regulation of Investment Advisors on 26.9.2011 and had invited stakeholder comments thereon. It had also issued a circular dated 22.8.2011 which had certain due diligence requirements. In this connection FIFA (which was still in its formative stage) had an opportunity to meet Mr. S. Ravindran, Executive Director, SEBI on 20.10.2011. Further to the meeting on this issue, the Foundation had presented their comments on various aspects arising from the concept paper by submitting their written comments on 15.11.2011 wherein the practices followed throughout the world and the impact that the proposed regulations would have on the industry have been elucidated. This meeting was followed by a meeting with Mr. Anant Barua, Whole Time Director, SEBI, on 28.02.2012 to discuss the issues arising out of the draft concept paper. FIFA had submitted its views after discussing the draft proposals with the various stakeholders including AMFI, CE O's of leading Mutual Funds , investors and the distribution community especially IFAs. FIFA attempted to provide a modified version of the regulations with a view to develop a balanced regulation in interest of all stakeholders. We are happy that the proposed changes have not been implemented as they stood and the current proposal has taken into consideration many of the views of the Foundation.

    Thereafter, on 3.5.2012 the Foundation was called upon to attend a meeting to be chaired by Mr. Prashant Saran, Whole Time Director, SEBI. The main agenda was to discuss the issues constraints and suggestions regarding the distribution of mutual fund products in India. FIFA used the opportunity to highlights issues which were impacting the growth of the MF industry and the steps that could be taken by the regulator. A summary of the issues discussed has been enclosed as Annexure 9.

    Thereafter, on 10.7.2012, FIA had a meeting with Mr. Agarwal to discuss various issues plaguing the mutual fund industry and steps that would reenergize the industry. FIFA also offered to jointly work with the regulator in creating Investor awareness by participating in the programs conducted by SEBI in this context. FIFA also offered to give feedback to the regulator on the operational and servicing issues which Investors would be facing in connection with investments in Mutual Funds. FIFA has invited feedback on these issues from across the country and is in the process of first discussing these issues with AMFI and the manufacturers and then giving feedback to SEBI on the need for any regulatory changes to facilitate the servicing requirements of Investors.

    Thereafter, on 29.8.2012, FIFA had a meeting with Mr. Prashant Saran, Whole Time Director, SEBI to discuss various issues arising out of the press release dated 16.8.2012 on reenergizing the mutual fund industry - in particular, the apprehensions around the direct plan. FIFA has requested for representation on the Advisory Committee and has offered to participate in the development of a long term policy for Mutual Funds proposed by SEBI. FIFA has also offered to participate actively in the proposed plan of Government of India for financial literacy and financial inclusion.

  5. Interaction with AMFI

  6. FIFA has had a number of meetings with AMFI to discuss amongst other issues, the various regulatory and other changes introduced by the regulator, the hindrances faced by distributors in distributing the mutual fund products, the possibility of an online platform available to all IFAs, operational and service issues faced by the distributors. FIFA has suggested measures which could be taken by AMFI/AMC's to prevent mis-selling to investor's and unnecessary churning of investor's portfolio's and lead to protection of investor interest. FIFA has also indicated willingness to develop of code of ethics leading to better practices for investors. FIFA also organized a meeting with other local / regional association of IFA's with AMFI .We have been encouraged by the response to our initiative and have been promised a quarterly meet to discuss problems faced by the IFA community while distributing mutual fund products.

WF : That's quite an action packed engagement with the regulator, the Ministry and the trade body of MFs. Did all of this leave you any time for some of the other areas you have been keen on - like sharing of best practices and knowledge initiatives?

Dhruv : Yes, we clearly would have liked to be spending more time on knowledge related areas and sincerely hope that we will have a stable regulatory framework for our businesses to operate in. Having said that, we have taken a couple of initiatives, which were well appreciated by our members.

On the 18th of June 2012, FIFA alongwith Motilal Oswal Mutual Fund had organized an interactive session on "Perspectives and learning of Advisory Business in U.S., U.K. & other markets with Mr. Frank Satterthwaite of Vanguard. This gave a great perspective of the advisory model etc. to all those who attended. It also gave an insight into the unique model that Vanguard follows with Investor Interest at the centre of all it does.

On 18th of April 2002, FIFA had a workshop on the issues arising out of the circular issued by SEBI dated 22.8.2011 and in particular on the requirement of certain distributors to undergo a due diligence as mandated by SEBI. Thereafter a concall was arranged on 20th of April 2012 for the benefit of all IFAs who could not attend the workshop.

On 21.6.2012, the confederation of Indian Industry (CII) held a Mutual Fund Summit 2012. The topic for discussion was "Indian Mutual Fund Industry: Is there a silver lining?" The Foundation was one the industry support partners, and I was invited and did participate in the panel discussion.

A draft National Strategy has been prepared under the aegis of the Sub Committee of the Financial Stability and Development Council (FSDC) and has been simultaneously released for comments by all financial sector regulators. The draft strategy was put up in public domain by SEBI and RBI. Market regulator SEBI had invited comments on the same. FIFA's comments on this report and the role that FIFA can play in this very important National Agenda were tabled with SEBI.

WF : That's a huge amount of work for an entity that's not even a year old ! What's the road ahead looking like at this point of time?

Dhruv : In our profession, we need thought leaders from all over the country to contribute meaningfully towards self-development of IFAs, as this is the only way we can collectively ensure that we serve our clients better and thus become more successful. We would like to see FIFA getting more and more active in the space of sharing of best practices. We look forward to working with Wealth Forum in the arena of knowledge and best practices sharing, as we share a common vision on these aspects.

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