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I strongly endorse the view of mr srinivas . Trail model will be the ultimate panacea for our survival in coming future . We should go all out for implementing this model with all AMC .

Only trail model of commission is more profitable for advisor. So every advisor should adopt only trail model of comission.

Let us not fall prey for temptation and ruin our future. We will grow if we survive. Our survival surely is dependent on banning of upfront commissions and other incentives except trail commissions. Hence i request all to ask for banning upfront commissions and ask for all trail model.

Yes I agree with this. To get maximum revenue IFA''s should opt for all trail model but some new IFA''s may need more upfront for the sake survival.

I pretty much agree with Mr. R. Srinivas Kumar and all others who want to ban the upfront commission and to have a trail model similar to that of Franklin. In order to increase the number of active IFAs, trail model has to be implemented with immediate effect by all the AMCs, which in turn will benefit the entire mutual fund industry.

Actually speaking all the major fund houses are sponsored by Large Banks. These fund houses always push for consolidation by Banks. The big banks want IFA to create new clients for Mutual funds so that thaft they could poach them on later date. As statistics reveal that erosion of Distributor strength has benefited the Large Distributors positively. With every market upturn New investors flock the market and there would be new Rouge Agents to catch new breed of investors. Again when market turns sour these agents evaporated leaving the investors hapless and possible pray for Banks. Unless and until SEBI scraps the entire Upfront commission in all schemes( including ELSS) these large entities have a killing .

Its a good idea suggested by Mr. Madhusudan. Let other IFA''s also may give their views.

I agree with Mr. Srinivas Kumar and all others who have voiced to ban upfront commission and to have a trail model similar to Franklin & if possible even a better one. Government says " Sabka saath, Sabka Vikas " Only when SEBI, Finance department of the government & MUTUAL FUND REGULATOR takes our side, their slogan has got the value in the true sense. In fact, because 5 to 6 % upfront is paid to big sharks like all banks, our trail commission has been pittance. EUIN has been introduced & hammered on us but is there anybody from the sharks industry been penalised? At least, in case of insurance industry, we have heard insurance companies having been penalised by IRDA, for fraudulent practices. Have you ever heard of any big distributor or banks being penalised for wrong sale? The main culprit is AMFI organisation members most of whom have their own banks so they will see their own fat profits by acting in their own favor. This is similar to our parliamentarians deciding to get pension for lifetime irrespective of their tenure in the parliament. So how to bell the cat when we are mice?!!! The only way in my opinion is to raise our voice through a petition to the prime minister with at least 50 % signature of our total current IFA members. We can also initiate further voice through Moneylife Foundation who can not only help us for the justice we seek but also can provide us the necessary judiciary support to fight out at 1. Judiciary level through court,2. to form a petition 3. to put a separate pressure at the right place in government machinery to get our grievances heard and attended to. Franklin has come out with the idea, because now-a days they depend on individual big & small distributors & not on the bank kind of distributors, whereas bank oriented Mutual fund houses need not bother about us as for them we are lilliput who can be crushed at any time & every time. The irony of our fate is that we ,in India, do not have strong mutual fund houses who are not having their own bank channel & apart from bank sponsored mutual fund houses, others struggle like us only. In my opinion, we need to implement these three suggestions at our earliest. Still if any one can come out with better/more suggestions in this regard, they are welcome to put forward their ideas at the earliest because here who says is not important but brilliant idea which takes us further in the direction of our goal is more important.

Ban Upfront commission and only trail model to be allowed for a long term sustainable business and survival of genuine advisors and curb fly by night operators. In 2006, where in upfront commissions were 4% upwards, there was huge huge misselling with zero respect to the type of investements advised and the investors were only interested in who ws giving higher kick backs. if we do not want the repeat of this, UPFRONT COMM MUST BE BANNED

Upfront Commissions must be banned to curb misselling & Trail only model like Franklin must be followed by all AMCs & Trail must be at least 1% for the survival. AMCs are not following Franklin because they are earning more at the cost of IFAs.

If Franklin or for that matter any other fund house thinks that they can serve investors directly with an expense ratio of 0.30% then what is the need of around 2.4% expense ratios charged by the fund houses? SEBI should ban all the distributors and ask the fund houses to run on an expense ratio of 0.30% to call this bluff(Even if SEBI doesn’t ban distributors we will be out of business quite soon anyway with a direct expense ratio of 0.30%) . It will be a crime on the retail investor that I bring in as he will be subsidising the expense ratio of a HNI or a Corporate. 0.30% direct expense ratio is making fun of the system and small investors, nothing less.

Ban upfront commission. Implement all trail model.

Flaw 2: The second flaw that is being exploited is the commissions paid to various categories of distributors vary significantly and average is taken to arrive at the difference in Direct and Regular. After all, an average commission of 2.0% can be arrived at by ‘N’ number of combinations. For example “if a small distributor is paid 0.5% and a big distributor is 3.5% the average still works out to 2.0% but the investors coming through a small distributors will be paying unfairly high amount to buy the units”. Hope these flaws are eliminated by banning the upfront commissions and bringing in transparency in accounting of expenses between direct and regular, so that small investor interest and those who serve them i.e. IFAs are safeguarded.

Flaw 1: The first flaw in the argument is that no consideration is given for the services of a distributor that he / she renders in place of the fund house in certain aspects like cost of office, time and resources which direct investors otherwise would have consumed had they interacted directly with the fund house etc., which is in addition to the advice provided.

Obviously this outrageous figure of 0.3% in direct share class is arrived at by exploiting the flaws in the application of Direct share class to Equity. The Direct share class law says “whatever that is paid to the distributor should be excluded from the expense ratio”.

I like trail only model. It''s healthy way to all our IFAs. We need to educate other IFAs who do not know & understand about this.

Agree with Mr. Raghuramam and Mr.Sam Koshy. A higher commission in the first year especially in upfront format increases the gap between direct and regular. As long as upfront commissions are there we are not safe and ways will be devised to throw us out. Our clients will be subsidising the expense ratio of HNIs. Upfront commissions should be banned.

As IFAs we know such big commissions are not possible for big distributors in only trail that is either uniform or increasing in its nature. We also know that only trail is good for investors and the industry. Why not ask for a ban on upfront commissions altogether? What''s the stand of IFA Associations on this ? As IFAs we need a solution soon. Please post your opinion.

Some of us might be thinking that if Franklin increases the gap between direct and regular by paying high upfront commissions to big distributors, I''ll do business with some other fund house that doesn’t the same thing. While that remains a valid question, what if all the fund houses do the same thing and show the gap between direct and regular artificially high? Where would we run? How long can we run like that? Why not ask for transparency in accounting of expenses instead of running for life all the time ?

If fund houses keep on paying huge upfront commissions to big distributors, the gap between direct and regular keeps on increasing as average of commissions paid will be taken as difference between direct and regular. If direct share class expense is shown as around 0.30% as Franklin is doing now, our assets will melt like ice and we may not survive even 2 years in this business. It is unfair for our clients too as they will be charged more than what is being paid to us as commission (they have to pay more for buying the units than they should). HNIs who use direct will be subsidized by our clients. Upfront commissions should be banned for the survival of both small investors and small IFAs.

SEBI needs to go though your article seriously and ACT.

Ban upfront commission. Implement all trail model.

I totally agree with the above views. All Trail model should be implemented by all AMCs as early as possible.

yes , i support ur arguments and i do favour banning the upfront commissions .I vitiates the atmosphere . These closed ended schemes has eroded the reputaion of IFAs. AMC should voluntarily avoid giving upfront commissions for their long term benefit .

i fully agree.ban upfront commission in the interests of the IFA as well as the investors! boycott those fund houses that offer upfront commissions!

I agree trail commission is only solution to sustain in the market. And i opted in HDFC, Birla for trail only

Trail-only model is best.

It is not true that the total commission including upfront and trail will be around 1.1%-1.20%. Commission differs from scheme to scheme.Now let us take the instance if one person invests Rs 1lakh in and equity fund upfront commission @0.60% will be Rs 600. I will get it for the first year. Now if that person does not continue after 6months. Then will will get commission only upto 6 months @ 0.60% for 6 months which will be Rs.300/-. Does AMCs guarantee that even after withdrawal of fund by the investor we will get the trail???

Very relevant discussion topic Mr. R Srinivas Kumar. As long as AUM churning exists the trail model will be unpopular. AMCs , if pay only trail will be losing the balance money in the future. So big AMCs will not accept this proposal. Those IFAs with less AUM will be benefited by upfront model. But those IFAs having handsome AUM will be surely benefited only by trail model given the condition that these IFAs are not churners. I''''m sure big AMCs will not accept the trail only model. But we must fight for this. There should be options/choices to choose. If one want trail only then he/she can opt for that one. IFA associations must press AMCs to make this in practice.

Franklin certainly is offering only trail model for all the distributors. With the remaining fund houses we have to ask for only trail model. If we don’t ask for only trial model they don’t give simply because only trail model is good for IFAs and not so good for the fund houses. Encouraging only trail model is good for the investors, industry and IFAs in the longer run.

I have a strong belief that " Advisor" is as big a brand as the AMC. In fact their influence much higher than that of AMC. So brush aside the AMCs that are not rewarding in the form of full trail.Rather than worrying about the fund houses that are not giving only trail model, it would be better to concentrate on fund houses with good funds and that also give only trail model.

Many of the fund houses offer trail model to only those attained a particular aum slab.

Hi Friends, When I checked with AMCs about Trial only model, Birla,Franklin,Reliance have agreed for it. but i was told ICICI and HDFC don''t have Trail Only model. Please let me know if any of you have/know if ICICI and HDFC also have Trial only model.

Really speaking it is not only Huge loss to IFAs but also huge loss to AMCs & Clients also. If present structures can encourage churning it is huge loss for all participants.

Dear Srinivas, Thanks for opening this discussion. The Trail Only model is the BEST We all must come together and force AMC''s to adopt this model. Moreover this is a more democratic model in the sense that small/tiny distributors are rewarded equally. Am sorry to comment so late.I had not considered your article carefully.

All necessary steps should be taken to discourage churning.

Dear Mr. Raghuramam,, Thats what I am doing... Already I started diverting with only three AMCs, who are giving ONLY TRAIL MODEL BROKERAGE... But we must put pressures on those top 5 AMCs who still hesitate to offer ONLY TRAIL MODEL since they are familiar with investing public due to branded names....

Hi P. Ravi Krishnan , The best way to handle this is to divert your business to the performing schemes of fund houses that give good trail.Then the results will follow.

I have requested top 5 AMCs namely HDFC Mf, Reliance MF, Birla MF, ICICI Pru MF & UTI Mf (with whom I am having AUM running into crores...) via email umpteen times to release me ONLY TRAIL BROKERAGE. But neither of them are keen on accepting my requests. Those bigwigs AMCs hesitate to accept my requests for the reason best known to them... How can we expect ourselves to put pressures on them to ban upfront????

Fully supporting Mr Amol Joshi. Lets do our part. Include this in our mails -"Request you to Ban all upfront commissions and implement a Higher Trail Only Model for me. Thank You."- This may work out if all IFAs will request for such a shift from 01-JANUARY-2014 onwards.

Upfront commission is the main reason for miss selling. This commission/ incentive based selling is encouraged by both AMC and big distributors like banks. AMCs are not confident about their performance and distributors want to generate instant revenue. This wrong practice already spoiled this wonderful mutual fund industry. The AMC as well as the distributor should be more responsible and get chages/commission only when the investor also get benefited. The AMC most of the time come with wrong fund at wrong time. The recent flood of closed ended NFO''s with very high upfront of 5% or more is an example. Only the genuine IFA with long term vision suffers the most in this situation. I support trial only model. Trial only model is the best way to stop all type of bad selling prevailing in this industry. It also bring out the best from Advisor

It is beyond any doubt that ''staying put for longer period'' generates wealth for Investor. If this is true, it is clear that trail only model will work better for the distributor as well. Lets play our part in making this option a reality: On 1st (first week) of every month (or every quarter) AMCs circulate Brokerage Structure. On every month 1st, lets just send a mail to AMCs/RM and specifically asking for TRAIL ONLY model. I am sure this kind of feedback will be registered at each AMC and it may just kick-start the process of migration to all trail model. Lets play our part and see change happen!

Banning of all types of upfronts & incentives and implementing a higher trail only model is the best way for creating wealth and profits for all the stake holders in the long run. We request the regulators to do this to save the industry.

TRAIL ONLY COMMISSION IS GOOD, IF THE PAY OUT IS SOMETHING LIKE FRANKLIN TEMPLENTON.

I totally agree the article that upfront commissions must be banned & trail only model with 1% trail should be the only recommended model of Brokerage.

only trail module immdeate stop upfront

YES . TRAIL MODULE ALWAYS BETTER FOR ALL DISTRIBUTORS . ITS ALSO GOOD FOR INVESTOR,S . THANKS AJAY GOYAL ARN-76140

Please ban upfront commissions so that we small distributors are saved from extinction by pass backs and so that we can get only trail model. Transparency helps us get a fair share for our hard work

yes

I VOTE FOR ONLY TRAIL. ALSO STOP DIRECT PLANS ASAP.

I prefer trial only model. It is beneficial for both investor & IFA

Equity is generally an appreciating asset and hence all trail is ideal. If you go for good upfront and poor trail, you will lose out. Once you get investment of Rs 100 and take upfront, please note you get upfront on Rs 100. So if it was 1% upfront you got Re 1. At the end of second year if the value becomes Rs 120, you got 1% of Rs 120 and hence the upfront does not remain 1% but it is 0.8% only. If you had taken high trail your earning would not be restricted to earning on Rs 100 but it would be on an average of Rs 100 and Rs 120.

Yes, we should raise voice for trail only model.

YES THIS IS CORRECT. WE SHOULD HAVE TRAIN ONLY MODEL . OF COURSE BIG DITRIBUTORS ARE ENCASHING ON SMALL DISTRIBUTORS EFFORT. WHICH SHOULD BE STOPPED IMMEDIATLY. THANKS, NEHAL H PANDYA BARODA

Trail only model is definately better. However Direct Plans need to be stopped ASAP.

I support trial only model. It is a win-win situation for investor & distributor.

I AGREE WITH YOU SIR.

Yes my dear friend I agree with you. It is a bad practice Of AMC"s.

Yes my dear friend I agree with you. It is a bad practice Of AMC"s.

I totally agree with Mr Ashok Krishnan, Few of my clients AUM under me was transferred to ICICI Securities asking them to Open Demat account free of Charge and that the offer was open only for a week. On the pretext of signing the demat documents the AUM is transferred. Worst is the Fund house does not bother to inform us about such a change. For propagating such unhealthy practices, they get hefty commissions from Fund Houses which are far higher than IFAs. Can anyone suggest how to protect the trail commissions against such unethical practices.

I fully support for trail commission only. All banks,corporate brokers and other big agents are stalling AUM of small distributors by hook or crook. I have experienced with ICICI securities who stall my AUM by saying to investor that their investment will be transfered in their demate account then they transfered all aum in their code by wrong practice. They also churning the investor portfolio for upfront without taking investor in confidence. I am ready to support you in any cost. Ashok Krishnani

I fully support for trail commission only. All banks,corporate brokers and other big agents are stalling AUM of small distributors by hook or crook. I have experienced with ICICI securities who stall my AUM by saying to investor that their investment will be transfered in their demate account then they transfered all aum in their code by wrong practice. They also churning the investor portfolio for upfront without taking investor in confidence. I am ready to support you in any cost. Ashok Krishnani

sir It is a v v v good point but this point can raise through a association we must fight this case with regulator. one more important point is DIRECT BUSINESS We all must protest against direct dusiness because these all investors retail/HNI/INSTITUTION was introduce by us only how amc can cheat us it is tempring of our client data.

I too support All trail model. and all amc''s should do it and give around 1.2% trail from day 1 as the average FMC comes to around 1.8 to 1.9% per annum to AMC''s.

it is very good idea for long duration for IFA prospective also longer duration benefit for customers

It good and advantage for IFA if all AMC start giving Trail 1 to 1.2%.

Yes I agree with u, Sir.

THERE SHOULD BE DIFFERENT MODELS FOR DIFFERENT PRODUCTS. IN MY OPINION, THERE SHOULD BE UPFRONT COMMISSION FOR EQUITYBASED PRODUCTS. WE KNOW THAT EQUITIES R BOUGHT FOR HOLDING FOR A LONGER PERIOD THAN DEBT PRODUCTS. U CAN BE SPECIFIC WITH DEBT PRODUCTS HOLDING FROM 1 DAY TO 1000 DAYS. SO DEBT PRODUCTS COMMISSION SHOULD BE ONLY TRAIL COMMISSION

Yes, I too agree with Mr Rao. Well articulated, analyzed post. I too resist bad things. let us make it respectful.

Yes, I agree with you Mr. chilukuri KRL Rao, completely. The upfront commissions paid, only puts the advisors / distributors / IFA''s, to keep running / struggling / misselling / churning. This is very clear and evident to all regulators. Still they want it ( vested interested ), not the IFA''s. I too request the IFA community to support this call and urge the Regulators / Authorities to make way / implement " ONLY TRAIL COMMISSIONS STRUCTURE", which creates good and better atmosphere for the growth of the Mutual fund Industry.

Yes i agree with you and oppose the same.

Sir, I am with you .

This discussion from you is really an eye opener. All my support is with you.

1)It makes perfect business sense to go for trail only model. Its is the best model for the AMC''s - as their own income is from trail only. Hence they will save on cash flows. Which they can pass on to the IFAs as greater trail. 2) Also , exit loads must also must be banned. The exit loads can be with drawn , only when there are no upfront commissions and other sales costs are reduced to minimum. 3) Trail only model will bring stability to AUM , which is good for the investors , AMC , and hence for the IFA. 4) When there is no lure of upfront commissions , misselling will be preventeded to a great extant. So I request to all institutional bodies involved in this MF services to support trail only model. As an individual , I will encourage all those AMC''s who follow the trail only model. I earnestly request the fellow IFA''s to do the same.

It is a good intiative for trial from all AMCs

MORE TRAIL IS ADVISABLE THAN UPFRONT COMMISSIONAS IT HELPS INDUSTRY TO GROW WITH GOOD REWARDS TO INVESTORS AND IFAS.

The discussion on "Upfront and Trail commissions" is worth sharing among all IFAs. Basically any IFA''s interest is on his client and not on the company which lures with more upfront. The consistancy of any companys'' AUM, depends on its performance and high trail commission is justified to any IFA rather depending on the descriminating nature of the companies giving more upfront commissions to anttract more business. Some of the tall claims futforth by the companies while intrtoducing the various funds have been put to acid test and the real nature of the companies are evident. I concede with the idea of more trail commission than upfront. Regards Janardhan

You are Right Only Small Distibutor are Wrong n Big AMC are Right ????????? Ban Higher Upfront N ND''s Higher Commision All India All AMC All Distributor are Same Revenue Model = Then After Industries Growth

Yes i support all trail model because it is sustainable and simple to calculate payouts and no worry of claw-back.

sir, I AM WITH YOU IN THE CAMPAIGN FOR TRAIL ONLY AND SUPPORTS ALL EFFORTS TO ACHIEVE THE GOAL.

I also support the trail only model.

Sir, agree on all the points but long term business going to effect due to direct plan. Two different NAV for same scheme/fund going to disturb the client base of IFAs. Performance of IFAs and no of IFAs are not going to improve unless AMCs stop paying higher percentage to Banks/ national distributors. SEBI/AMFI/AMCs all giving importance to only HNIs. Small Investors are not going to invest in Mutual funds in future unless certain rules creating hardles to small distributors are changed.

I 100% agreed upon the proposal you suggested for the long term growth and for the survival of the IFA community.....

I fully support the only trail model......!!!!!!!!!!

I fully support the only trail model......!!!!!!!!!!

long term view & trail only model is most desirable.

I fully support only trail model like Franlin Templeton.

Thanks for giving a good suggession in a time when a distributor is facing everying expensive. The model of a ifa is to be responsible for misselling but a fund manager is not responsible for that act. It is very essential that investors hard earned money be managed as good as your own money. Thanx.

I fully support the only trail model like that of Franklin

dear sir(all), i fully support higher trail model only. Good step taken by F.T. But think what action against the fund house who eat our investor''s money (under perform regularly................)

I Fully Support Higher Trail Only Model. Hats Off to Franklin Templeton MF for yet again becoming the Pioneer !!!

m is always for trail only, collection of funds and its maintenance should have same expenses,but fund houses create variations and whenever there will be variations, means management expertise,cannot be good for the investors, eventually to industries. Definitely the leaders led the path which is shortest for himself, not for the industry. SEBI knows very well. If Franklin did not show the way of paying trail since long back, we were in dark. Now again Frankline is the pioneer of 1.1 percent trail?

We all know that the largest fund houses in the industry pay a trail commission of 0.4-0.6 % along with the upfront commissions and incentives. But, all these commissions put together comes to around 1.1- 1.2% in the first year. But, the upfront commissions and incentives are paid only in the first year, meaning we will get a trail of around only 0.4-0.6% for the remaining life of assets. Franklin Templeton Mutual Fund has come out with an all trail model (no upfront commissions and no other incentives) where in they are paying a trail of 1.1% perpetually. To make it simple, if an IFA has 3 crore assets in both Franklin Templeton and Biggest fund houses, he/she will be losing Rs.2 lakh or even more from the second year onwards in Biggest fund houses as long as the assets are there. It is obvious that if Franklin can pay 1.1%, then bigger fund houses too can pay it without much difficulty. Should we fall prey to the upfront commission trap and lose this kind of money? Please give your comments.

Everybody now-a-days concerned about the introduction of EUIN numbers. SEBI want to curb mis-selling & churning that''s why they introduced EUIN. It''s highly advisable that instead of intoducing EUIN SEBI should think about BANNING ALL UPFRONT COMMISSIONS & INTRODUCE A HIGHER TRAIL ONLY MODEL to achieve the aforesaid objectives very effectively & positively.

1.5 trail feee for t-15 and 1.8 for B-15 cities is will be fine and justifiable to everybody. Thanks for taking initiate to take openion

GOOD NEWS. More & more AMCs are ready for uniform trail model. Those not ready for it now, have also started thinking on it. Healthy development.

I support trail model. It would be beneficial for advisors in the long term.

Well said.........I fully support the trail model........!!!!

I FULLY SUPPORT THE ALL TRAIL MODEL.FOR A NEW ENTRANT THEY WILL SEEK FOR THE REVENUE FOR THEIR IMMEDIATE NEEDS.BUT THEY ARE ALSO SUPPORTING ALL TRAIL MODE BECAUSE OF CLAW BACK SYSTEM AS IT IS DISAPPOINTING THEM.LET US WELCOME ALL TRAIL MODEL.

I fully support your views. Only trail model will also eliminate lot of jugglery being used in brokerage calculation and reporting. More over Upfronts/Lumpsum incentives should not look attractive in this new era of Clawback rules. Distributors should prefer steady Trail income and Simpler Brokerage statements. A little sacrifice in the asset building phase will ensure a more profitable and steady future.

Templeton''s strategy to migrate fully towards trail model is a win win situation for all the stake holders. I whole heartedly appreciate this move. with this backdrop, we shld also debate if we really need an exit load at all despite the same being ploughed back to the scheme. there are no reasons for others to follow suit. ramanathan dwarakanathan http://ddramanathan.blogspot.in/

SEBI gone to sleep, they are not interested in growing this industry , taking steps which are not conducive for small investors . I appreciate your efforts in bringing this matter to the forefront and forcing all MUTUAL FUNDS AMC AND SO CALLED ASSOCIATIONS FOR SMALL IFA. WE SHOULD ASK THIS QUESTION TO AMC ,WHEN THEY WILL START ONLY TRAIL BROKERAGE.

I agree with you. +1 for your advise. Let''s all fight for trial only model. And thank you for the information.

well said Mr.Rao.

Well said Mr.Rao. Good exercise you have done and you have brought the misdeeds the ''DISHONEST'' distributors, to the light. WILL THEY CHANGE? !!!!!

Well said Mr.Rao. Good exercise you have done and you have brought the misdeeds the ''DISHONEST'' distributors, to the light. WILL THEY CHANGE? !!!!!

better to go trail commissions

I agree with your opinion, there should only trail commission and if any upfront it would mandatorily parallel to trail commission, Regulator also should think for intermediories not only for investors,as now renewal fees for distributors are increased to such level small IFAs can''t even efford it.

after gonthrough all the ifa friends comments ,I also support thesame trail emphasis movement, thanks all friends to,share therethaughts kanad

after gonthrough all the ifa friends comments ,I also support thesame trail emphasis movement, thanks all friends to,share therethaughts kanad

Fully agreed by Mr. R. Srinivas.

I support Mr. B R Jagannathan of Salem & Mr. Sam Koshy of Kollam.

I support Mr Jagannathan from Salem. Lets short list those AMCs who banned upfront and offer us a higher trail only model and start diverting our business to them. Then only all AMCs come towards banning upfronts & implement a higher trail only model without delay.

Sir, My personal opinion is, Try to shortlist AMC''S who offer trail only model and if the investor''s needs can be fulfilled within the gamut of funds they offer, just finish the deal... Never hear from AMC who always try to pull you on higher upfront.. Go for those who give Trail only... To name a few, I get good trail from Frankllin, Birla, Axis, Tata, etc who have got all types of funds... Largecap, Midcap, MIP, Balanced and liquid, which are quiet good in performance also....

Agree to what Mr.R. Srinivas Kumar said, if FRANKLIN TEMPLETON MF can go for ALL TRAIL MODEL then why its difficult for other Big Fund houses ? I hope if all IFA''s are united on this issue, surely sooner or later other AMC''s will follow...

The upfront commissions are upfront fraudulent practice, enabling discrimination. Ban upfront commissions and also BAN So called Contests .. an honest and knowledgeable distributor, does not need contest to motivate him/her to sell. How many AMCs have ever given you data on Contest winners ..?? who can they be, except promoted mis-sellers ..?? how come the regulators are silent ..?? Incentives, need not be declared upfront .. only they can be TRANSPARENT trail commissions duly enhanced, for LOYALTY, which is the hall mark of a performing fund.. where the client continues for a long tenure, with conviction. Naturally, churning will be discouraged. Please give this a serious thought .. along with what is being already debated and articulated.

Any smart distributor/advisor will choose trail only model. And this is regardless of the size of the distributor.

I extend my all support to pay full trail model.

If Trail model is implemented by all amcs without uniform rate for all years, it can not discourage churning. Churning is beneficial as first years trail is higher than second years. So it is need of the hour to introduce uniform rate of commission for all years.

I support Mr. S K Bagaria, Mr Sam Koshy, Mr Srinivasa, Mr Rajesh Gupta etc and all others about ban all upfront commissions. If we want to stop churning and if we want to mobilize good quality long term equity assets then upfront commissions should be banned fully. A higher trail model which can be incentivized in the longer term will support all stakeholders in the industry. So, we all request SEBI to ban all upfront commissions and pressurize all AMCs to start the higher trail only model immediately.

EVEN A SMALL IFA IS NOT DEPENDING ONLY ON MUTUAL FUNDS.MOST OF THEM ARE ALSO DEALING WITH INSURANCE,HEALTH,POSTAL ETC FOR THEIR IMMEDIATE EXPENSES.MAJORITY OF NEW IFA S ARE GETTING DISCOURAGED WITH CLAW BACK SYSTEM.

I am 100 % agrees that upfront commission should be banned. I think all the companies has started claw back condition than there is no fun of taking commission in advance and than reversion of the same , if the client ask redemption before one year on pro rate basis. The time is coming when client will prefer to take redemption even after paying exit load, if the product sold is not of good quality. I think sebi should also stop charging exit load, if the investment is one week old. If this will come in force than all such IFA, selling wrong products and paying upfront from trail will be on there toes.

I''m putting my view, discussion on ''Ban on upfront''. 1st of all, I am against of it. Reasons are:- A) In this case, only AMC would benefited. Because, they doesn''t have to pay In single shot, rather they will pay in 12 months installment. They will benefited enormously. B) Committed MF Distributor will losses income, reason they will get whole income in part. C) every businessman / self employed need good income to deal with house hold expenses. And in this case, Trail will not support in initial years.. So how can they survive in initial years. D) Churning is totally different issue. In my opinion, this can in every way, if upfront is there or not.. It is case of malpractice, not an issue of upfront. E) insurance field too support of upfront commission. F) in developed country like USA, upfront is exist. G) MF industry need all kind of distributor.. Big dist., Small dist., Rural dist., Urban dist. Don''t target big distributor for upfront issue. H) SEBI need to more strict regulation on fund manager and fund management. These are the some arguments..

Trail only model should be encouraged to give a stable & reliable income for distributors so as to increase their confidence about their livelihood. Once the industry can instill that confidence number of active distributors will increase (from the current 5000-10000) which in turn helps the growth of the industry.

Upfront commissions are root cause of almost all the ills of the Mutual Fund industry and I have no doubt that as long as there are upfront commissions honest/small distributors and investors will be at a dis-advantage and the industry can not inspire the kind of trust required for mass participation of investors. Hence I request the regulator to Ban upfront commissions.

IF ALL TRIAL MODEL IS APPLIED SENIOR IFA S WILL GET MORE COMMISSIONS THAN PRESENT STRUCTURE BECAUSE THEY HAVE A GOOD AUM.BUT STILL WE ARE FACING OBJECTIONS FROM THEM.THE PROBLEM IS FOR ONLY NEW ENTRANTS IN THE INDUSTRY WHO WILL TAKE MINIMUM 3-5YEARS FOR BREAKEVEN AND STILL THEY ARE WELCOMING ALL TRIAL MODEL.EVEN SOME COMPANIES LIKE FRANKLIN TEMPLETON,BIRLA SUNLIFE,IDFC ARE COMING WITH ALL TRIAL MODEL.EXPECTING THE SAME PRACTICE FROM REMAINING ALL BIG COMPANIES.

Uniform rate for all years means that 2nd years payout(ST%) will be same as total of first years payout(U%+FT%). Churning happens mainly due to higher payout in 1st year. If fund houses pay 2%-2.5% trail in first year & 1% perpetual trail in remaining years. Still churning is beneficial because of higher payout in 1st year. Churner can get redeem the amount after 12-14 months & new fund can get that amount. Churner can again earn 1st years 2-2.5%. After that same process can happen again after 12-14 months. So uniform rate is most powerful tool to discourage churning. Only trail model is not sufficient to discourage churning. After introduction of claw back real meaning of upfront commission is trail paid in advance. There is no actual upfront commission left now. Uniform rate for all years doesn''t leave any space for churning.

Moreover, if monthly lower income(in trail only model) is an issue then having no income at all due to claw back for months together(due to claw back, many distributors are getting zero brokerages/negative brokerages) is even worse. Upfront commissions take certainty out of our income streams and don’t let us plan our own finances in a proper manner.As long as upfront commissions are there small distributors/honest distributors will be paid low Trail commissions, hence I request the regulator to ban upfront commissions and encourage honesty.

I have started my business in upfront model about Two years ago and I am still not breaking even because of the low commissions from the second year on wards. Had it been a Trail only model we can reach break even point in about 3 years. But with upfront model the break even point will be after 5 years only and that too is dependent on the regulator as he may cancel all commissions if irritated by churning that happens due to upfront commissions.

Whoever entering the Mutual Fund industry as a distributor fully understands that it will be impossible to survive distributing only mutual funds in the initial phases and it becomes compulsory that we distribute other financial products like Health, Motor, life insurance etc., to survive the initial phase. So, it becomes a question of how quickly we new distributors break even in this business (meeting expenses-both family and business)and turn it profitable.

Demand for ban on upfront commission will be naturally opposed by those who need upfront. As we have right to raise any issue, they have right to oppose it. Because of this demand our discussion is diverted to (unnecessary) wrong direction. If uniform rate for all years is implemented there is no question of churning. If annual income is equal in all years what is the benefit left for churning activity? Our aim is to discourage only churning, but not small distributors. Think about the income of a distributor who collects business of 2-4 lac every month. Is Monthly income of Rs.200-300 an acceptable amount? If our demand is against the interest of small distributors, they will oppose it. Our intention is not to encourage churning, on the name of small distributors. Uniform rate for all years is a powerful tool to discourage churning. If we will try to satisfy majority of distributors, we can achieve our goal. Leave it for amcs & regulators to decide about upfront. Uniform annual rate is only acceptable solution for majority.

Moneylife has published an article on this... All distributors must read.. It''s small fund houses that would not support the ban on upfront commissions as they would not be able to promote their schemes... Distributors who fraudulently churn a clients portfolio would be happy with upfront commissions.... http://moneylife.in/article/why-dont-funds-promote-trail-commissions-instead-of-upfront-commissions/32856.html

Kajal Gupta must understand that all IFAs are agents of AMCs which they are empanelled with. You are unaware of the bad consequences of churning and upfront commissions. Banning of upfront commission is very important to create top class AUM for AMCs. A trail which is higher is actually going to multiple IFAs income in short Period. I suppose either you are agent of churner or confused by some AMCs or churners or are yourself a churner ? Wisemen in this industry have already identified the importance of a higher trail only model. There are some important top class distributors who have started contract for a higher trail only model with almost all AMCs they empanelled. This trail comes 1.1%-1.5%. Kajal Gupta !! Can you imagine the income of these people with such percentages and they have wonderful increase in their clients investments too. So, think sufficient times before you depict your words my friend.

Based on performance, payment of a 10 to 20% extra commission to the big distributors (on what are paid to small distributors) is understandable. But, how can one justify the 50 to 150% or even more of extra commissions (on what are paid to small distributors) as performance incentives, that too as upfront which are known to encourage churning? The reluctance to ban upfront commissions from the fund houses smells of conflict of interest as well.Request the regulator to ban upfront commissions for the benefit of investors and industry as a whole.

The main real culprits of churning is Banks and some big distributors. Eventhough comparitively less there are small distributors too who churn for making maximum income from the existing investments. To curb the entire distributors churning behavior , a total banning of all upfront brokerages and starting a higher trail only model are necessary. SEBI , if concerned about investors interest , may please do these immediately to save the whole industry. I agree with Mr Sam & Mr Raghuramam in their comments about the subject.

This is response to Mr Desai : Sir , we are suggesting to abolish upfront. Your trail stars , from the end of the month in which you procure the buines itself. Hope you appreciate the financially and economically better model of getting trail. For new IFA''s it any way does not matter , as they start their career with this. For the existing IFA''s and large brokers , it does not matter as , they are advising on relatively large and huge AUM''s. But the good out come would be that , certainly it will prevent churning. For an investment advise , commission is not motto! It shall be the merit of investment itself. See whats happening to Traditional insurance policies. Soon they will be extinct. As long as we do not stop churning , its not going to be good for IFA''s, not going to be investors ,and not going to be good for the AMC''s. Longterm sustainabiity is important. For that we must take this bitter pill called stopping the upfront.

There is a strange situation here. People with higher codes (Say 20000 to in upwards of 80000) want trail only model. Hundreds of their comments support the same. But, some people with ARN codes that start from the range of 200 to 20000 want upfront commissions (actually these are ones who had well settled in the business by now..and there should be no impact for these category of distributors) for the sake of “New distributors”. So much love for small distributors and new distributors! Had the same love been there for the past 5 years and had upfront commissions been a good model for small distributors and new entrants, we would not have seen the exodus of thousands of distributors from the industry. Wish the regulator Bans upfront commissions and allows only trail model, so as to eliminate these manipulations of the greedy few.

I support Trail Only model with 1% Trail commission to ALL IFAs irrespective of his business.

All AMC giving upfront only reason to encourage charning portfolios of the customers by the bankers and NDs. so that they get bussiness to reach AMC peoples sales target. why cannt uniform no upfornt and only trail commsion then automatically charnning misselling will end

The distributors or advisors propogating trail model sounds like agent of AMC. I am afraid what intends them to waste time on same. How can we forget that nothing is constant. Who is going to ensure that this is it. No subsequent changes. This is a measure purely catching advisor on wrong foot. If they so very thoughtful of advisors why don''t they raise the sencond & subsequent year trails euqualent to first year remunation (what they have kept in trail model). We don''t mind receiving 50% - 75% as upfront and balance trail for first year. Advocators of this model are so selfish that they are forgeting the interest of small distributors for whom upfront models means so much - to meet their monthly expenses. So bro if you belong to a league of distributor who have consolidated respectable AUM go ahead it certainly suits you. In any case why not AMC should have both the options open to end the debate & infact there are AMC''s observing same. This is precisely those AMC''s who don''t want retail business vis vis we should also start thinking alternately.

It is obvious that the kind of obscene upfront commissions that are paid to some big distributors are not sustainable especially when one considers the fact that some of these distributors may be churners too. To pay these high upfront commissions for these un-scrupulous elements, small / honest distributors are being short changed. This un-ethical practice will stop only when upfront commissions are banned. Request the regulator to ban upfront commissions to remove the corruption associated with the industry once and for all.

Dear All, there is no entry load in the system now. In such a situation giving upfront commission means there is something fishy with the investors money. As distributors we are answerable to our clients. Every distributor must be careful with their investors hard earned money. Normally, in a situation which is having no entry load there should not be an upfront also. I , call for a total BAN ON ALL UPFRONT COMMISSIONS in the Mutual Fund industry. My dear friends killing your duck which lay golden eggs to you is not a wise act. Survival of our investors money with a decent return is most important. Take my word, everything will come to us automatically if upfront is banned and implement trail only model soon. There are a number of AMCs planning to implement a higher trail only model soon. Such an act will surely develop the industry and will bring and sustain quality assets in the system. If we don''t pressurize for this to implement now, I''m sure SEBI will surely come with a total ban on all commissions and will ask us to get fees from our clients of we need. Remember , about 6 months back we all survived by .50% which a lot of our friends left this field. If SEBI ask us to take our fees from the client, will we survive this rising cost conditions? Will our dependants survive by us ? We must better ask and answer ourselves without delay.

Even after a month the discussion is active. It shows the seriousness among IFA fraternity with regard to their inclination towards trial only model,which is beneficial to all the stakeholders. Request for all the concerned people to relook the importance of the issue and take necessary action by shifting to trial only model.

Even after a month the discussion is active. It shows the seriousness among IFA fraternity with regard to their inclination towards trial only model,which is beneficial to all the stakeholders. Request for all the concerned people to relook the importance of the issue and take necessary action by shifting to trial only model.

If we want to creat long term business then trail module is the best. We are in the business of investment where we manage others money,we dont have right to invest client money in funds which is not performing well but give only good upfront commission. Trail module reduces churning and give stable businesses module. And ultimately it protect from big distributors to small. I request all my distributor friends to votes for trail module.

I agree with you that all IFAs should prefer and support Trail model and discourage upfront model. But how can we do this single handedl? Mere comments will not do.

I support with higher trail only model. please start this model to save the total mf industry.

I support trail model but also suggests uniformity in all amcs and if any regulator comes in this direction he should do something diffrent for the upliftment of distributors and mere presence of a regulator is not enough and hope he will not work like irda which has nothing for insurance advisors, so i don`t want that also. hope better and prosperous future for all distributors. thanks. anand kumar deo

I support the theme and vote for trail model of paying the remuneration

I fully agree with your views.

I fully agree with your views.

I would like to receive upfront commission and I would continue to be ethical, non churning, non pay back type etc. There must be upfront comission, incentive, brokerage, fees directly paid to the distributor by the AMCs and there should be trail also. To curb the bad practices, depriving the genuine small distributors from upfront commission is not the way. We have to find out some other way to stop, eliminate all these bad things from the system but certainly not at the cost of upfront commission. If you want to stop upfront commission, please stop it in all financial products and also think of equity and other broking also. Is there not any of these bad things? To build up a trail of reasonable quantum one may need to spend many years in the rural or semi urban markets and how should be sustain till then? What about switchover, change of broker, redemptions, change in regulations, market conditions etc. There is great scope and people will start investing in mutual funds like they keep money in banks in say next 10 years but I will not be there after 10 years to work. Tomorrow some other bad thing may creep in and may necessitate scrapping of trail commission then what should I do? There must be some immediate compensation by whatever name for the work done and then the incentive for long term.

IF THERE IS NO UPFRONT, THERE WILL BE NO CLAW BACK. ONLY SERIOUS & PROFESSIONAL AGENTS WILL REMAIN IN INDUSTRY.

I completley agree with you. I wish this is read by all IFA''s and we all join together and need to fight for this sacred cause. Hope , we take this message to the authorities, make them think and do what is most required in the rightful sense.

As long as there are upfront commissions, the ills associated with the industry would not go away. I request the Regulator to Ban upfront commissions and allow uniform trail model only.

Upfront, in absence of entry load is injurious to the health of MF industry. But, instaed of making a hue and cry as to what others are doing, we need to starts supporting ethicals(What we understand). Not the hue and cry but our actions only will force others to change.

National Distributors are compensated on behalf of IFAs as they get lot more than IFAs as Upfront Brokerage, Contests, Overseas trips, Gold, Movie tickets, Pizza parties & more trail while IFAs have to be satisfied with lesser trails 2nd year onwards. Franklin Templeton Mutual Fund must be congratulated for showing the courage to deal all distributors with one eye.

I totally support the trail model adopted by Franklin Templeton MF. I am of the firm opinion that Upfront Brokerage must be banned in MF Industry to curb all types of misselling & Trail Commisions might be increased accordingly to boost ethical selling. Franklin Templeton MF must be thanked for a good initative.

Yes it is very true all trail model is the only best method, as one is required sell the right product in a right waY. It is in the interest of IFA and Mutual fund Industry.

Yes it is very true all trail model is the only best method, as one is required sell the right product in a right way. that will enable an investor to remain invested longer. it is in the interest of IFA and Mutual fund Industry. Up front commission, as we all know encourages all bad practises.

Yes it is very true all trail model is the only best method, as one is required sell the right product in a right way. that will enable an investor to remain invested longer. it is in the interest of IFA and Mutual fund Industry. Up front commission, as we all know encourages all bad practises.

Requesting all AMCs to consider the active ifas opinion and implement the uniform trail model. This needs to be done soon to avoid all churning possibilities. SEBI may please intervene and consider this request. It is in the better interest of the investor

This is seriously an important issue adressed.we really believed that if small distributor does not come forward to take benefits of what is right for them otherwise big distributor will takeover business of small one. We have to adopt trail only model which gives levelfield play to small Distributor in long run.and withthis churning is low and assets lie with distributor for a long time.

Dear All, I highly appreciate and support this activity for ban of Upfront commission and Launch of Only Trial Model. Thanks and all the best for this movement. I will always be there to support you, if required. Great..Get Going..!!!

TO AVOID CHURNING , SEBI MAY PRESS AMCs TO STOP UPFRONT BROKERAGE PAYMENTS ON INVESTMENTS. INSTEAD AMCs MUST BE ENCOURAGED WITH A TRAIL ONLY MODEL WHICH CAN BE 1.25% ONWARDS. THIS WILL ENSURE GOOD QUALITY OF ASSETS AND REDUCE LOSS OF INVESTMENTS TO CLIENTS BECAUSE OF CHURNING.

its important to implement the trail only model soon. stop churning and implement uniform higher trail only model.

The admintrator of this Forum has fixed a limit of 1000 characters to each comment. The counting on this discussion is misleading in terms of the number of IFAs commented on a controversial and a NON-ISSUE like this at this point of time. This write up is not to comment on the merrits of the subject as it is not a consultative paper brought up by any competent Authorities such as Amfi, SEBI, or AMCs or recognised Distributor Associations. It is ideal for the Distributors to realize that this colums are open to the public including our valued investors. Will the administrator come out with the actual number of IFAs commented on the subject on the basis of ARN holding and restore the confidence level of both 50,000 strong KYD complied Distributors and the investing public. and Investing public.

If churning needs to be removed then a higher trail model is needed soon to save the industry. I request Vijay at wealthforum to take up this issue and be forwarded to AMCs & SEBI.

I totally support higher trail, which I personally have been demanding for last four years. May I request Mr. Vijay Venkatram to reach our voices among all AMCs....?

Sahi discussion chal rahe. Yeh bahuth important hei. Churning market se nikalna hei. SEBI yeh naya solution try kar aur dekho churning will be gone. If churning is allowed slowly investors money will be fully gone to the distributors pocket. Yeh uniform trail only model implement karke dekho poora sahi ho jayega. Higher trail for distributors market ko surely develop kare.

Requesting all AMCs to consider the active ifas opinion and implement the uniform trail model. This needs to be done soon to avoid all churning possibilities. SEBI may please intervene and consider this request. It is in the better interest of the investor.

I don''t know why it is not regulated. Regulator should give necessary instructions to all amcs for uniform rate of commission to discourage churning.

I support Mr.Parameswaran, Mr Chilukuri, Mr. Rajiv Jhaveri, Mr Sam Koshy etc ... on this issue. It is important that churning should be avoided to protect the erosion on investors money. If SEBI really wants to protect investors'' interest then SEBI may suggest AMCs to implement a trail only model which can be higher and uniform. If it is implemented the entire churning will surely be disappeared forever. All the stake holders will be benefitted.

I strongly feel that if upfront commissions which is the most stimulating factor for distributors are not paid by the big fund houses then obviously most of the distributors will lose interest in mobilizing deposits for the fund houses and in turn I feel that the percentage of deposit ratio will certainly be on the downwards side.

Posted by K. Parameswaran,Rourkela,ARN-2540 on 10-May-2013 The industry, per se, may not be indulging in money laundering, but the fact remains that a lot of mal-practices are still going on in the marketing of the funds. And Banks and Institutional Advisers are the biggest culprits in the scheme of things. Neither SEBI nor the AMCs are really bothered about these malpractices because they are only interested in collections - how the collections come, is not their look-out. Therefore, to say that everything is hunky-dory int eh industry sounds a far cry. IFAs are also to shoulder the blame on mal practices. Churning has been the practice of the day all through amongst all sections of the marketing community - banks and IFAs included - and if this cannot be termed as a mal-practice, then someone should clarify what is mal -ractice. In the process, the investor has been the loser because due to his inability to do things direct, he becomes dependent on IFAs who invariably dupe them. To stop this practice, the only way is to go for a "Trail only" model which will put banks, corporates and erring IFAs in quandary. We should therefore, support this model

Churning has done big damage to the goodwill of the Industry. Industry can discourage churning by stopping paying higher commission in first year. Franklin has taken a very good initiative by implementing uniform rate of commission for all years. Some more amcs have also started offering uniform rates. We hope remaining amcs will adopt same type of structure soon for the benefit of the Industry.

It is very heartening to see that this topic is so live. It''s wonderful to understand that IFAs are aware of the best remuneration options in practice. It''s happy to note that the best remuneration model will be the most beneficial to the clients too. It''s wonderful to say that we have the best available solution to stop churning is to adopt a higher trail which is uniform for all years /or may be incentivising a longer term like 10+ years. AMFI is usually headed by Franklin Templeton officials and this Franklin has started to adopt the trail model all over India. Shall we request other AMCs in AMFI to follow suit. All AMCs must notice that empanelment in Franklin is in top gear this time. That means a higher uniform trail only model is accepted by active IFAs all over India. We request SEBI to explore the feasibility of implementing a higher trail only model which is unform for all years ? Will SEBI accept this best available solution to stop churning and develop Industry in a healthier way ?

" Why not a fixed trail for all similar scheemes and all types of agents.This will bring in transparency , and stop misselling. The best fund will sell well.As commissions are fixed , no question of selling bad ones or promoting them unduly!" An all trail model is good for IFA''s and is equally good for AMC''s.

I fully agree with the view that the income model should be completely a trail model for a mutual fund distributor. It would give better clarity on his revenues.

I feel & agree that Trail only model will give regular and stable income in long run. It will discourage churning also. So better to ask fund house and regulator for uniform commission (trail only) structure for all funs houses.

Brokerage structures should be designed in such a way that directly or indirectly churning is not encouraged. It is duty of all participants to discourage churning. Uniform rate for all years, is one of the most powerful tool to discourage churning.

We have a choice to make here and decide our own fate. Either we can take the bait of upfront commission and allow the regulator to come in and wipe us out next time around or we can take the temporary pain of taking commissions on a monthly trail basis. I know that it is not an easy choice, but who said taking worthwhile choices in life is going to be easy? If we allow upfronts to continue we will have zero commissions anyway sooner than latter (due to the regulatory ire).

Some people are asking for options, but we have to remember that regulator doesn’t make separate laws for those people who are opting for upfront commissions (and hence are more susceptible to churning) and those who opt for Trail only model (where the chance of churning is almost zero). When there is a change in law even those people who are honest and opt for trail only model, will also suffer. Shall we allow this by asking for options?

If an IFA, being honest keeps his assets for more than 1 year he will get 0.4% and a dishonest guy will get almost 3-4% by churning just after 1 year(that is 10 times more income than what an honest guy gets). Can anyone resist this temptation? Is such corruption good for the investors and the industry? How long will it take before the regulator comes in once again?

Big distribution houses support upfront simply because majority of churners are from this category. If an ordinary distributor gets 3-3.5% upfront in B-15 imagine the kind of money that big distributors are making with their bargaining power. With claw back gone after one year, can investors be saved from these unscrupulous elements with this kind of upfront commissions?

The fact is upfront commission is a bait to divert our attention from a higher trail. Why do fund houses need to do this as everyone knows the trail only model encourages quality at all levels? It is not exactly the fund houses; it is the top managements of these fund houses whose salaries are linked to the profits of the companies. Upfront commissions inflate the profits of the fund houses temporarily and help top managements of fund houses get higher salaries, though they are detrimental for the industry in the longer run as they bring disrepute to the industry and don’t allow it to grow faster.

It seems that fund houses are giving the impression that they love IFAs and they want to take care of the financial stress of the IFAs through the 3% upfront commissions (B-15). If they love us so much why not pay 1.5% commission on a monthly trail basis for all the years (they are paying 0.4% only from the second year onwards which is too little to survive on)? Why help those churners? Why attract the attention of the regulator?

We know that greed is as old as the human race itself and we can never eliminate it. What we can do is we can eliminate the environment which allows greed to come out (eliminating upfront commissions). As we have seen in the past, upfront commissions encourage those people who are dis-honest and make them grow bigger and penalize those who want to be honest.

The sad part is most of the people who churned got away in all this (I have not read any where about the banning of a big distributor due to churning in all this while). As they have earned fat sums due to churning almost all of them survived the entry load ban and got bigger whereas a majority of IFAs who are honest and are counting on the entry load to take care of their needs (and also as they have not accumulated any fat due to churning) could not survive the entry load ban and left the industry.

Bigger guys hardly get affected by changes in law (whatever little affect that is there will be temporary on them as they have resources to survive until the business environment gets better). Dis-honest people obviously find ways to bend the laws so they too are not affected. It is always the smaller IFAs that face the brunt of any change in law and we have seen proof of the same in the past 4 years (since entry load ban) with thousands of small IFAs leaving the industry.

We know that it takes a long time to change laws in India because of the procedural issues. Regulators would not like to change laws unless otherwise they feel that it is absolutely necessary. We have to be honest enough to agree that the incessant churning that was happening due to the greed of a few individuals who tried to take advantage of Entry Load (to be precise upfront commissions) for years together is what forced the regulator to Ban Entry Load.

I should say I am lucky in that I had financial support from my family members. Not many people were that lucky as their incomes dropped to 20% or even less of what they used to be before entry load ban within months. I have seen a few of my senior colleagues leave this business at the age of around 40 and I have seen them struggle and search for small jobs, some other businesses etc., Some of them are still struggling as they do not know anything apart from selling financial products.

I am a child of Entry Load Ban. I left my stable job and joined the Mutual Fund industry around February 2009 as I saw a great future for the same. I based all my income calculations on entry load and trail which was around 0.4% when I joined the industry. Within 6 months all my plans were shattered as the entry load was banned in August 2009. I had nothing to do with what caused the Ban as I had hardly done any business until that point, but I knew that I was paying for the sins of others.

It seems that some of our friends are worried about the cash flow issues if the entire commission is paid through Trail only model. How about a zero income/zero commission model/ fee only model that is awaiting us if we allow churning to continue any further? Let me take you through this by sharing my own experience in the industry, so that all of us can appreciate the importance of trail only model.

This idea of higher trail is a welcome step for the sake of our IFA brethens. But i doubt whether AMCs will accede to our request. AMC guys are drawing higher salary than IFAs. It is learnt that an institutional head guy in a small sized PSU Bank sponsored AMC in kolkata is drawing monthly salary for Rs.1.50 Lakhs. Imagine how much a regional head in top leading AMC is drawing their salary??? May I request Mr. Venkatram to hear our voices among all AMCs and meet our demand for the sake of their business as well as our future.

SIR, YOU ARE ABSOLUTELY RIGHT. WHAT FT HAS DONE IS LANDMARK DECISION INDEED AS THIS WILL STOP THOSE ADVISORS WHO ONLY CONSIDER SCHEMES PAYING HIGH UPFRONTS. BUT, A SMALL PROBLEM IS ADVIOSRS WHO HAVE JOINED THE INDUSTRY VERY RECENTLY SAY IN LAST 3-5YEARS THESE PEOPLE MIGHT NOT HAVE GARNERED HUGE AUM TO SUPPORT THEIR FAMILIES ONLY ON TRAILS . IT IS INDEED TRUE THAT TRAIL COMMISSION MAKE OUR BUSINESS VIABLE IN THE LONG TERM BUT ONE NEEDS TO CONSIDER THE IMMEDIATE NEEDS ETC. SO , I THINK THE FUND HOUSES SHOULD KEEP THE OPTION [ LIKE OPT -IN AND OPT-OUT IN TRANSACTION FEE] ZERO UPFRONT / FULL TRAIL, 50% UPFRONT -50% TRAIL OR 1ST YEAR UPFRONT / NO TRAIL

Dear Sirs, Greetings, The discussions and suggestions floated by Mr K R L Rao is quite relevant to the Trail Only Model benefitting the common IFAs also. As long as AUM churning persists, then the trail only model will not be implemented. AMCs are keen in looking into this type since this will gradually pave the way to the AMCs to jump into trouble even for their survival in the long run. Hence, Big AMCs may not accept such a proposal and the IFAs with lesser AUM with smaller AMCs could be benefited to some extent. However, if this matter could be taken to authorities in a joint manner by an All India Federation-like Body with a converged ECHO, then the authorities will blink and see to it seriously. Regards, C N ANNADURAI 72403

I have the same thing to say as Mr Ameerali said. How can we survive with this type of income at the huge rising cost of anything & everything. This is why mutual funds distributors abandoned this industry. If AMCs are note increasing our trail income as Franklin did we will also soon be quitting the field , by 4-5 years. If it is like that , will AMCs be benefitted by removing all the distribution system from the market ? Do AMCs think that they can survive by the new cadre distributors who already retired from their existing jobs and have just 5 more years to work for developing this push product with such a low margin? Do AMCs think that the SIPs they have got registered by now will run forever ? I think if any AMC have answers for any of the above questions are "YES"- then go forward. If any questions have an answer "NO"- then implement the higher trail model soon to avoid critical illness to the Mutual Fund industry.

I support Mr. Ameerali M. With 0.4%-0.5% margin it will not possible to survive. For eg. a new distributor collecting business of Rs 1 crore in first year will not able to survive. Why anybody will choose this business? Even a distributor having aum of Rs. 4 crore will not able to meet day to day expenses. For majority of distributors it will be impossible to sustain in this business. Number of active distributors has fallen down rapidly in presence of heavy inflation. Due to this habit of saving is discouraged.

With rapidly increasing expenses due to inflation and approaching huge educational expenses of my children it will not be possible for me to survive with just 0.4-0.5% margin that is currently being offered by fund houses, in such a low volume and push product as mutual funds. Besides, if my income is hardly sufficient for meeting my current day to day expenses, when will I save for my retirement and health related issues? When will I save for my children’s marriages? If fund houses don’t give me a higher margin through a Higher Trail it will be impossible for me to sustain in this business for too long.

Uniform trail model is the only way to avoid churning at the same time to develop the fund mobilization for companies too. Advisors will see their incomes hike if the trail model is implemented. AMCs will find their assets stay with them for longer term and thus more profits. Investors will find more increase in investment growth because of no churning. Requesting all AMCs to start the higher uniform trail type payment without further delay.

Higher Trail model is better income generating for all ifas. All advisors must be offered this model. This will be usefull for all participants. Companies must come up with higher trail model to make churning extinct from the market. If companies don''t come up with higher trail model then it is sure that the entire ifas will be extinct from the market in maximum 5 years.

Though trail model is good for longer term a portion of this said higher uniform trail model must be offered upfront for new comers like us. It is highly appreciated if all distributors who supports the higher uniform trail model also support the said change.

For longer term distributor higher trail is really good. But for starters there can be some upfront offered. But this can be a break up of first year trail and can be paid upfront as suggested by some prominent seniors from Mumbai like Mr Rajiv Jhaveri& Mr Dalapathy from Coimbatore.

The best way ahead is the higher uniform trail model for all stakeholders. Distributors must identify this is the best profit maker. Actually churning will be out of the business if upfront is removed and higher UNIFORM TRAIL is paid. So the regulator must take this opportunity to force AMCs to stop upfront model and start uniform trail model. If higher uniform trail model is not implemented now then there will be no IFAs left in this market after 3-4 years as somebody commented earlier. I fully agree with Mr Chilukuri KRL Rao in the subject. It is very encouraging that all prominent associations like ASK Circle, IFA Galaxy, AKIFAA, CIFAA etc have noticed and supporting the higher uniform trail model. We distributors are sure that AMCs will implement it as soon as they can.

I don’t believe that “online” is a panacea. It can reduce the execution time and especially be useful only for those distributors who have a high end clientele. It may not be of much use for majority of the distributors who cater to lower income group investors and elderly investors, as this group of investors may not be comfortable with online execution. Even today a huge majority of the retail money comes in the physical format. Rather than trying to force people to adapt to online investment, if we can streamline the physical application process to make it simple(by sorting out the issues related to KYC, bank change, nomination change etc., and by having common application forms for investment and service issues) we can make mutual funds a product of mass consumption. The focus should be on making things easier for investors. If people think that the technology is easy to adopt they will do so in due course of time as they did with mobile phones. Pushing it won’t help.

Wish fund houses don’t see this discussion topic as a tussle of upmanship, but as the last ditch effort by the IFAs who are trying to be alive in the industry. It is just a struggle for survival and if fund houses don’t give a higher trail there will not be any IFA left in this industry even to make this feeble fight with the fund houses in 3 – 4 years time.

Thank you for supporting the Trail only model Mr.Kanak Jain. Request you to make the importance of Trail only model known to all our IFA friends who may not be tech savvy/do not check online platforms like wealthforum regularly. Higher Trail only model can give a sustainable and dependable income and gives certainty to even a small IFA about his/her future. All the IFAs are eagerly waiting for the proposed national federation as they see it as means of official and efficient communication of their genuine issues with the regulator and fund houses. Whatever little number of active IFAs left in the industry (around 5000) understand that if the current harsh conditions continue in the industry it will not be too long before all of them are out of business(hence this urge to form a federation). The investors’ unwillingness to pay a fee is well known and squeeze from the fund houses because of their unwillingness to share even a part of the increased expense ratio with the IFAs through a higher trail is making it even tougher for the IFAs.

I fully support the views of Mr Srinivas Kumar. Distributors are not forcing Amcs. Distributors have the option to continue with the existing ones or to shift the existing assets to those ones which give higher trail model. If AMCs change to trail model the entire churning will be finished and the regulator will be friendly with all distributors. Churning is the main culprit who keep our regulators away from us. We want our regulators to think for our betterness and not for making every new regulation to harass us

There is a slight twist in this scenario emerging due to Direct Plan being introduced from 1 Jan 2013. After a couple of years/2-3 years, the gap between regular plans and direct plan will be quite obvious n visible. Hence, the tendency of investors to switch from regular plan to Direct plan will increase. Hence the comfort of receiving trail perpetually will disappear. Trail commission will disappear. Probably even this fund house is anticipating the same Hence, this Fund house has been visualising a win win situation by introducing all trail model wherein it can curtail cash flow on account of upfront payout and no need to pay trail as well later on due to switch from regular to direct plan by investors on a massive scale. Hence probably not desirable model.

Mr CHILUKURI K R L RAO of HYDERABAD is doing a lot of work for the IFAs . He is actively looking into various problems faced by the IFA community. I had an opportunity to meet Mr Rao today and Mr Suri yesterday at Hyderabad. We all are looking forward to have an All India Federation Soon by this Month end. Mr Bhatt , Mr Bagaria and all the other members of diff associations are coordinating . Once the Draft is ready we will be circulating the same to all the IFA or on wealth Forum. THis once approved by everyone and with all the meaning ful changes , the article and Memorandum will be in place. The Federation will never talk about commisson or things like that . But it should work on the structural things which will benefit the root level IFA''s as community. Trail Only model is a good model and should be considered . Online investment should become a reality. Advisory should become important day by day. Number of IFA across India should increase. All this will only make MF industry move forward .

Highest comments ever in time of 16 Days. Great success of the discussion. It has successfully developed opinion for better future of the Industry. My heartiest congratulations to Mr. R. Srinivas Kumar. Majority of comments do not agree with existing structures of Higher payout in First year, which is a very healthy development. More & More distributors have not only raised their voice against churning, but also they want to discourage churning.

Dear IFAs , as a proverb says" little profit but leads to big loss" is very true in case of ifas who are reluctant in losing the small 0.30%-0.50% first year. Higher uniform trail with a long term incentivising is the best way ahead for all long term asset managers, distributors & investors. High uniform trail will keep away churning and thus the wrath of the regulator away. It''s important that AMCs must implement the trail system ASAP. May I know which AMC has a 6 months lockin & 9 months clawback & no exit load for their funds so that the distributor suffers clawback if investor redeem funds ?

We all know that trail only model is the best possible way forward for all the stake holders in the longer run. But we are a bit reluctant to take even a slight temporary loss (around 0.3 - 0.5%) due to the loss in commissions in the first year, though the gains are significant from the second year onwards in Trail only model. It will avoid lot of churning of AUM by the distributors too. It if comes into force then no tension of claw-back which distributors face now. There are some AMC come out with 6 Months Lock in for its funds and 9 Months Claw-back hence distributors suffer as the client with draw the money after 6 months as there is no exit load.

I hope that the big fund houses will impllement the HIGHER TRAIL MODEL with IMMEDIATE EFFECT.

Agree with Mr.Rajiv Jhaveri, the higher trail in trail only option should be uniform across industry. If the trail keeps on increasing at predefined intervals with the longevity of the assets, it will usher in a positive approach of holding equity assets for the longer term. It can work fantastically for all the stake holders .

I like to confirm Mr. Dalapathy, that I too have been quoting the same thing as what he has suggested. It will be clear if you can read upto the end of my earlier message. But the said discussion has been talking about full trial model from day one. On this my suggestion was depending on the IFA''s cash flow in the initial years he has to take a call. For a longer duration I too firmly believe that trial will work better than upfront. I have also suggested that the option of selecting the right model has to be given to the IFA as he is a better judge of his cash flow.

I''m very glad that IFAs are very much aware of the advantages of the trail model. Requesting all Associations to come up with their view on the important issue which is affecting IFAs lives. Its important that there should be a higher trail which should be uniform for all years.I fully support Mr Rajiv Jhaveri & M/s dalapathy finservices. But AMCs must consider incentivizing long term assets by increasing the trail rate from the 10th year onwards. Serious IFAs are concentrating on funds mobilizing through SIPs and this higher uniform trail model will be very profitable for all stakeholders for the longer term of 10 to 15 to 20+ years. All AMCs are requested to implement this higher uniform trail model as soon as possible.

We all know that trail only model is the best possible way forward for all the stake holders in the longer run. But we are a bit reluctant to take even a slight temporary loss (around 0.3 - 0.5%) due to the loss in commissions in the first year, though the gains are significant from the second year onwards in Trail only model. It will avoid lot of churning of AUM by the distributors too. It if comes into force then no tension of claw-back which distributors face now. There are some AMC come out with 6 Months Lock in for its funds and 9 Months Claw-back hence distributors suffer as the client with draw the money after 6 months as there is no exit load

I Support views of Mr. Dalapathy. Uniform rate for all years is the best solution for all category distributors. I repit my comments posted on 20-04-13 in the same thread. Posted by Rajiv Jhaveri,MUMBAI,58541 on 20-Apr-2013 Actually best solution is uniform rate of commission for all years. If in 1st year U% is paid as upfront & F% is paid as 1st year Trail, total of both (U% + F%) should not be more than trail (S%) 2nd year onwards . U + F = S. So if amc is paying 1.1% in first year, trail 2nd year onwards (till the assets last) should be 1.1%. So P. A. income will be equal in all years. Same topic was raised in my discussions dated 04-11-12 & 06-12-12. Below are links of that articles. http://www.wealthforumezine.net/ForumComments.aspx?id=43 http://www.wealthforumezine.net/ForumComments.aspx?id=72 Our efforts & support will create bright future for Industry.

Mr Srinivasan of Chennai must understand that during the first year there is an upfront already there. I suggest to go for uniform trail for all years. Lets consider 1.25% for every year. During first year the trail can be a break up of 0.50% upfront and 0.75 % trail/annum paid monthly. Second year onwards 1.25% per annum paid monthly. By this way all category distributors are able to receive the day to day expense for running their business. Mutual Funds are a low margin business for any one. Those who stay in the business for long term will be deeply benefited. The agents in India are comparing MF Business with insurance , FDs , Ponzis, real estate , some other distribution business which are having huge margins. It''s should not be like that. The various association should take opportunities to make distributors aware of the low margin is good for a longer run and also good for sustaining a client. The higher margin insurance schemes will surely take your clients away when compare to MF SIPs. So I suggest all AMCs to come up with a uniform higher trail only model. Also remember that apart from this the B-15 incentive of 1.50-1.75% also is there which is paid upfront for all equity investments from B-15 cities. Also remember that 6 months back we all were survived by just 0.50% only.

We have to see it from the regulatory angle as well. As long as there are upfronts there is a chance for churning. We may not do it, some big distributor may do it, but when regulator changes law we the small IFAs are the ones who is going suffer the most. The best example is, no big distributor is out of business in the past 4 years but thousands of small IFAs left the industry. If the regulator gets too irritated with churning he might ban entire commissions and we will be forced to ask a fee from clients. We know how difficult it is to get a fee. The regulator almost did that(zero commission) when draft adviser guidelines were brought in. Luckily mutual fund distributors were exempted in the final law. If churning continues we may not be this lucky next time around. Is the extra 0.3-0.5 % upfront commission worth all this trouble?

Dear Sirs, I myself am a new distributor as my code indicates(ARN-70974). But, the revenue loss in opting for a Trail only model (especially if the trail is 1.1% or beyond that) is a maximum of 0.3 to 0.5% in the first year. This will be more than compensated by the high trail in the second year itself. We have to remember that in a rising market situation such as now 0.5 % upfront commission extra paid in the first year is not the same as 0.5% extra trail paid in the second year and subsequent years. We will capture the growth of assets in our commissions. If my assets stay with me for more than 2 years (in most of the cases they will) the loss due to upfront commission model is going to be huge. Is it wise to propagate a model which gives a small benefit in the first year but gives us huge loss in subsequent years?

Trial commission is the best revenue earner for all those who have been in business for quite some time and have a decent AUM. But for those who have just begin their career or those who do not have decent AUM Trial may not earn revenue to sustain their livelihood. The recent exodus of distributors from mutual funds to other career options was basically due to low remuneration. In order to make this industry survive and grow we need more distributors who can penetrate and make mutual funds the most wanted product among the investing public. For this it is important that such distributors should survive and understand that it is a long drawn game, so now if they do not see income even for sustenance then a negative attitude will crop in and they may not only opt out but will also start bad mouthing about the industry. The AMC''s should also consider giving various revenue model options to the advisor so that he can opt the right one depending on his current revenue model and Aum.

I fully support higher trial model. This practice will help to reduce mis-selling and churning. Hope all Major AMCs will consider this movement. - Sudhakaran Namboodiri, Ex. General Secretary AKIFAA

TRIAL IS A GOOD MODEL FOR ALL THOSE WHO HAVE DECENT AUM FOR A STARTER THIS MAY NOT BE ATTRACTIVE IN MY OPINION IFAS SHOULD HAVE THE RIGHT TO SELECT A MODEL WHICH SUITS HIM THE BEST CASH FLOW IS IMPORTANT FOR MANY IFAS WHO HAVE STARTED THEIR CARRIER AND HENCE UPFRONT MAY BE SUITABLE IN THE INITIAL YEARS ONCE HE HAS ATTAINED DECENT AUM SWICH TO TRIAL MODE. MAY BE BENEFICIAL. IN A SITUATION WHERE NUMBER OF ADVISORS ARE COMING DOWN IT IS IMPORTANT THAT HIS INCOME FROM DISTRIBUTION MODEL IS VIABLE AND HE CONTINOUS THE BUSINESS WITH VIGOUR AND BE IN THE BUSINESS FOR A LONGER DURATION. ANY CASE THE COMMERCIAL ISSUES HAVE TO BE DEALT BY IFAS INDIVIDUALLY WITH THEIR RESPECTIVE AMCS AKNARAYAN

Once again I request Wealth Forum to convey message to the relevant authorities & amcs of majority of IFA''''s.

It is very clear that assets with longer term will fetch high income with a higher trail model and also note assets with lower term like 2 years will fetch higher income than that of the trail model. All AMCs are requested to come out with a higher trail model with a choice/option for IFAs to select from if they need the other model.

Thank you Mr. Suresh Nair for your comment. I kindly request to other associations to come out with their view on this important issue.

Request all other associations to come up with their comments supporting the trail only model on this forum, so that there wont be any chance for manipulation.

Hats off to AKIFAA and to Mr.Suresh Nair for your democratic spirit. You set a great precedent to all the associations who want to come up in a truly democratic structure. Wish the proposed national federation too has a structure akin to AKIFAA and develops itself in to a potent democratic force which can set aside whims and fancies of individuals (however big they may be) when it comes to safe guarding the interest of majority of the IFAs and the industry as a whole. I see good days for IFAs if the spirit is repeated across the country.

All Kerala IFA Association (AKIFAA) is in favour of a higher trail. A higher trails stands to benefit all concerned and would go a long way in reducing mis-selling and churning by Banks and National Distributors for which, we IFA''s, have received a lot of bad press . For the distributor the income from a higher trail is unlimited! The advantages of a higher trail have already been spelt out in previous posts. AKIFAA urges all IFA Associations and IFA Groups to make public their stand on this issue . We also request Mr Vijay Venkataraman of Wealth Forum to convey to the relevant authorities the sentiments of an overwhelming majority of IFA''s. -Suresh Nair General Secretary All Kerala IFA Association (AKIFAA)

Requesting all AMCs to initiate a higher trail model soon. Distributors have started flocking to those fund houses who offer higher trail model to them. Better to make it earlier to avoid loss of existing funds.

I fully support the views of Mr Srinivas Kumar. Distributors are not forcing Amcs. Distributors have the option to continue with the existing ones or to shift the existing assets to those ones which give higher trail model. If AMCs change to trail model the entire churning will be finished and the regulator will be friendly with all distributors. Churning is the main culprit who keep our regulators away from us. We want our regulators to think for our betterness and not for making every new regulation to harass us.

Let us all collectively request all existing amcs to shift to the higher trail only model. It is important for all of the participants. Amcs have started it for certain selected IFAs all over the country.Why amcs are not interested in starting this for all ifas ? We request companies to fix the higher trail model for all IFAs soon. We already have some amcs which are having top performing funds started it for all distributors. New empanelments in these amcs are shooting up. That must be an eye opener to all the amcs who are yet to shift to higher trail only model.

We requst each and every mutual fund companies to consider and start the trail model soon. It is important for the better of all the stakeholders. It is going to change the business fully. If Companies don''t want to start higher trail model advisors have options to shift existing assets to Franklin & those companies which offers higher trail model

Trail is a real game changer. We need the trail model implemented soon. IFAs must be educated about the importance of the higher trail model. We request associations to educate maximum IFAs about the importance of a higher trail model. It is the need of the hour. All AMCs are requested to follow suit of Franklin Templeton AMC in this regard with a basic trail of 1.25% uniformly for 5 years and then 1.35 % for till 9 years then 1.5% for 10+ years.

I wholeheartedly request all my IFA brothers spread across the country - Let us not confuse ourselves by putting across half-baked opinions in this very very serious thread of discussion. Let us not fight anybody else''s battle. Not even ours. Let us fight for our investor''s benefit. That automatically ensures ours. The decision of all AMCs to give us an option to go for an all-trail commission will open a new era in our lives - It will literally double our incomes. If we still satisfy ourselves with the morsels being offered in the form of upfront commissions, there is every chance that temptation to churn investments will enter our minds sooner than later. We should be able to freely switch investments between schemes and AMCs-- PROVIDED IT IS IN THE BEST INTEREST OF THE INVESTOR -- i.e., when the present investments are not performing optimally. Come to think of it , we are not able to switch freely between schemes and AMCs also today - because of this upfront and the resultant scourge of exit loads and clawbacks. So what are we doing resultantly?? Running desperately to stay put where we are!! Which is more important? Getting fresh sales at any cost and saving some AMC people''s jobs OR serving the investor right by giving him the best possible deal? Everybody thinks it is fashionable to talk in terms of investor interest but what is happening on the ground? Nobody is ready to let go of his immediate profit. So I think I do not have to explain further but I would say All-trail compensation would mean 1) Fair deal to IFA and investor too. 2) It would result in better returns for investor eventually. 3) More returns to more existing investors means much more wallet share for our industry and many more investors coming to our fold due to experience sharing/voluntary referrals. 4) Trail means only genuine switching of investments and hassle-free switching to better schemes. 5) I remember one ad in TV which is still fresh in my mind -- ''''Those who love their wives , how can they say no to _______ (popular brand pressure cooker) . So how anybody wishing for a better deal for our customer say no to TRAIL?

1) THERE ARE NO TWO OPINIONS - WHEN INVESTORS STAYS LONGER IN EQUITY INVESTMENTS, IT IS ACTUALLY GOOD FOR HIM. 2) BUT DUE TO LACK OF SUFFICIENT INCENTIVE, AN IFA TODAY IS NOT ABLE TO KEEP HIS COMMUNICATION LINK WITH HIS INVESTOR ALIVE FOR A LONGER PERIOD. - RESULT IS SHORTER TENURE OF INVESTMENT AND INVESTOR LEVEL RETURN BEING MUCH LESSER THAN SCHEME-LEVEL RETURNS. 3) SINCE ALL SINCERE IFAS THINK IN TERMS OF INVESTOR WELFARE FIRST, BUT HAVE TO MAKE A REASONABLE AMOUNT FOR THEIR OWN LIVELIHOOD TOO, TRAIL COMMISSION ALONE APPEARS TO BE THE SOLUTION TO THIS PROBLEM. 4) IT MAKES LIFE SIMPLER FOR EVERYBODY INVOLVED - IFA, AMC AND REGULATOR. 5) OTHERWISE, IT WOULD BE REALLY DIFFICULT TO PULL OUR INDUSTRY OUT OF THE RUT THAT IT IS IN RIGHT NOW. 6) I WOULD LIKE TO SALUTE FRANKLIN TEMPLETON FOR THE BOLD INITIATIVE THEY HAVE TAKEN AND WOULD REQUEST ALL OTHER AMCs ALSO TO QUICKLY FOLLOW SUIT.

higher trail model is the best one for serious IFAs. do you know that an sip with 5000/ month for 20years with a 1.25% trail will give the IFA howmany times more income than an insurance policy (having maximum commission)with 60000/ year for 20years ? It''s very interesting if you calculate. You will not believe it. Don''t fall in the AMCs traps. They are trying to confuse IFAs. Support trail model and all stakeholders will be benefited.

Agreeing with higher trail only model. We expect a trail like 1.25% upwards with more incentivizing the longer term assets. Trail model will surely in double the income of IFAs. Some AMCs trying to confuse IFAs that upfront model is the one with higher revenue. My dear friends , do not fall in their traps. Higher trail model will surely make our life better. We will be getting almost double income from this. Please be wise. Don''t be confused. I''m thankful to all those who publicize this concept. I really always felt that upfront was better. But understanding the facts given the condition that we are serious advisors, I support a higher trail only model. Request all AMCs to implement it without delay.

REQUESTING TOP AMCS LIKE HDFC, RELIANCE, ICICI PRU, BIRLA, UTI, SBI, DSP BR etc AND ALL OTHERS TO START THE HIGHER TRAIL MODEL WITHOUT FURTHER DELAY. AS AMCS HAVE THEIR OWN ASSOCIATION CALLED AMFI LET THEM BOTHER THEMSELVES. WE DON''T NEED TO BOTHER ABOUT AMCS. THEY KNOW THEIR WAYS. WE MUST BOTHER ABOUT OUR GROUPS, OUR INCOME etc. WE MUST FIGHT FOR OUR RIGHTS , TELL AMCS OUR DEMANDS, ITS THEIR CALL WHAT TO DECIDE OR NOT. IF THEY DON''T INTRODUCE TRAIL MODEL, THE EXISTING AUMS WILL BE SHIFTED TO THOSE AMCS WHO HAVE TRAIL MODEL. THEN ALL AMCS WILL AUTOMATICALLY INTRODUCE HIGHER TRAIL MODEL SOON.

I fully agree with Mr Srinivas Kumar. Request all AMCs to move to a higher trail based model. We need to give benefit to all stakeholders. We must not think too much about AMCs sides, they have their own association named AMFI to bother their activities. We dont need to be shy in saying our demands to AMCs. Let them react. We have to make our ways straight. Then everything will be in order. Request all AMCs to come up with a brave decision like Franklin did to fix the higher trail model soon.

I have come across some IFAs who support churning. And I have also come across a lot of IFAs who support higher trail only model. The former are not serious in financial advising and the latter are very serious advisors. A higher trail based model is better for all stakeholders. All AMCs please consider implementing the higher trail only model as soon as possible. We are entering a new phase of the market. Before that we make sure a higher trail only model will be in effect. Thank you all who tire a lot for making this discussion a hot topic.

Yes, "Only Trail Commission" is the best option.

Thank''s to all IFA''s friends who have posted the comments and making this discussion as one of the top in the forum and I hope top AMCs like Reliance, HDFC, ICICI Prudential, Birla, UTI, SBI and all others must consider coming up with a higher trail model of 1% perpectual as early as possible. we are looking for a sustainable growth of assets for the benefit of investors,distributors and industry as a whole.

May I please make a humble request? Debates and disagreements are always healthy, as it helps everybody gain many perspectives on an issue and formulate a well balanced view. It is however our collective responsibility to ensure that this process of debates on specific issues does not degenerate into or be seen as personalised attacks on any individuals. I am sure you will all agree that it is only fair that we exercise restraint when criticising or disagreeing with opinions of other IFAs. Let''s debate issues - but lets also make sure we don''t make personalised attacks on anybody in the process.

I agree.

Trial commission is better always all AMC will give TRIAL commission would be better livehood to all IFA''s We (IFA) all together can make better thank u

I think Mr C K R L Rao should read my comments properly and you will get all the answers with in. As you have said somewhere I am not here to take sides. I think we should utilize these columns more constructively and productively. Also we should restrict ourselves from misusing these columns with large number of comments by one single person. Do you have any comments on discrimination in the pay out structure of T-15 and B-15 IFAs ?

Yes, as opined by some of the IFA colleagues in this thread, TRAIL ONLY MODEL may be the one of the best practices NOT ONLY to discourage un-necessary churning but also to keep the IFA(s) more and more active as he needs to monitor more closely the funds’ performance and keep himself updated with the developments in the market. This way an IFA would be doing much more justice to his client. BUT is this model really UNTHINKABLE by our regulators ? Then, why is that they always talk of churning / mis-selling / penetration and come up with some regulations which is not at all justified with their concerns.

Dear Mr. Oomen Panicker I believe you have either mis-understood my comment or tried to miss represent my comment, when you tried to point out only part of my comment i.e.” Let us focus on our business rather than wasting our time on these brokerage issues” and taking it out of its context. I would be foolish to say that something that is related to my livelihood (i.e. brokerage) is not important. What I was pointing out is one of the dis-advantages of up front commissions i.e. complexity in brokerage reports due to up-front commissions and claw backs. I have no doubt that Trail only model is the best possible model for all the stake holders including investors. I strongly support “Trail only” model as it suits the IFAs the most and helps the industry grow.

All AMCs should follow one single method of compensation to the distributors. The method should be finalised in consultation with IFA association, AMFI and it must be reviewed once in a year. There should not be any quarterly announcements of brokerage payouts. This method should be the base like a base rate of interest on loans for the bank customers and over and above this all AMCs should be free to offer additional, time to time, scheme to scheme, case to case basis, performance basis, area specific basis incentives to the distributors.

12. Finally, IFAs elect an association to represent their own grievances. So, let us focus on that. There is nothing wrong in telling fund houses about what we want. Whether they agree with “what we want” is their prerogative. We should not sacrifice of right to express our opinion. Let us not bother too much about Fund houses; they have their own association called “AMFI”.

Online platforms disseminate knowledge faster and give less chance for those unscrupulous elements who want to manipulate IFAs for their own benefit. We need platforms like these to counter the autocratic tendencies of some of the influential members of the IFA fraternity. Media has been playing a vital role in balancing our nation’s democratic set up and the same will be the case in our industry too. All of it written in media may not be true but we should not try to belittle media for our narrow objectives and it is not good for the small IFAs (it is much easier for them to express their opinion on online platform rather than in a meeting dominated by powerful distributors)and the industry.

11. And your comment “except a vast majority of small, medium level and new distributors whose voice is not heared in Wealth Forum plat form” ---Nothing can be far from truth. You can check number of comments in this very discussion topic to ascertain the same. You would know that more than 50% of the unique comments(by ARN) are from B-15 indicating that online platforms like wealthforum is being used more and more by IFAs who live in remote areas as they do not have access to quality information through other channels on what is happening in the industry.

10. Regarding your comment that “AMCs know it better than us”---- if AMCs know our own good better than ourselves, why do we need an association then? Why are we suffering for all these years? Why are so many IFAs leaving this industry?

9. You say “AMCs prefer to have a trail based structure”, if AMCs prefer “Trail only model” then why are they not giving choice to IFAs to choose from “Trail only model” and “upfront model”. Who is stopping the fund houses in giving this choice?

8. Regarding your comments,” Friends, It is not even 2 quarters once the TER based additional brokerage is introduced for B-15 regions. AMCs are still studying the impact of the new regulation and as per my understanding All AMCs will move over to trail based commission structure over a period of time”,--- it is more than 6 months since the fund houses have been deducting the increased expense ratio for both existing and new assets from the investors. How much more time they need to “Study”? Have the fund houses promised you privately or through mail that they are going to move to trail only model in a specific time period? If you have the communication, please make it public? If you don’t have any such assurance from the fund houses how did you arrive at the conclusion that they “will move over to trail based commission structure over a period of time”. Is there any hotline between you and the fund houses?

7. If you have taken a voting on this issue, have you made the results of the voting public, so that there won’t be any possibility of manipulation of the voting result? How did your members participate in the voting process? Is it an online voting or is it a voting by ballot (Physical voting)? Is it possible to get a voting by ballot (Physical voting) in an industry where IFAs are spread over long distances quickly and effectively? Do you have an e-voting facility at all to get a quick response from the members of the association and solve their issues quickly?

6. If there is a higher trail only model then don’t you think the longevity of the assets brought in by IFAs would have increased even further and increased the overall probability of investors getting higher returns in Equity? After all we know that the longer the equity assets are held the better the returns are going to be. If investors get better returns don’t you think we are going to get better business and better name with a much lesser effort that we are putting in now? Have you ever discussed these advantages of a higher trail model among the members of AKIFAA?

5. Instead of simply putting in your comments, have you ever tried to explain the advantages and disadvantages of different commission structures as applied to IFAs whose assets stay in the industry for about 3 years ore more(Research reports say that more than 80% of the assets of an IFA stay in the industry for more than 2 years)?

4. If you have given these comments in your personal capacity, don’t you now that your comments can affect the opinion IFAs who look forward to you for your guidance?

3. One might argue we do not need voting, as that is why we office bearers are selected i.e. to take decisions on such important issues. But, office bearers are also human beings and some of them may have their own weaknesses. Wouldn’t it be better if we take voting on such crucial issues which could change the direction of the industry, to get the real pulse of even the smallest IFA?

2. We all know that AKIFAA has an image of a democratic set up. In confirmation of that image, Trail only model being such an important issue, have you followed the democratic process of voting to know the opinion of your members(after all your comments on the issue can affect the lives of all the IFAs and growth of the industry)?

Dear Mr.Oomen Panciker, I am not able to understand on which side you are talking about. Your comments gave rise to many doubts among IFAs. It would be great if you can clarify these doubts. 1. Have you given these comments in your personal capacity or in the capacity of President of AKIFAA?

Dear Friends, I appreciate one of the best comments given by Kollipara Bharat Kumar of hyderabad ARN 49834 on 22-04-2013 which reads '' Let us focus on our business rather than waisting our time on these brokerage issues''. Friends, It is not even 2 quarters once the TER based additional brokerage is introduced for B-15 regions. AMCs are still studying the impact of the new regulation and as per my understanding All AMCs will move over to trail based commission structure over a period of time. All of us including AMCs prefer to have a trail based structure except a vast majority of small, medium level and new distributors whose voice is not heared in Wealth Forum plat form. All AMCs know it better than us. I do''nt want to name any particular AMC or the rates offered but I believe every brokerage structure is prepared competitively with varying features and the Distributor has a choice to select among the 40 plus AMCs. Then why all this noice as Mr Bharat Kumar pointed out. Let AMCs compete on pricing rather than forming a cartel to dictate the price. The Real issue should be on the concept of T-15 and B-15. Tomorrow, it could be T-20 or 30 or based on the additional high volume of business generated your city could fall under T category. The industry is not doing fair with our T-15 colleagues.

Trail commission presents a win win model to all in the present circumstances. It is high time the larger fund houses shifted to the trail only model. This will encourage promoting investment with long term outlook and discourage churning, not to talk of transaction costs. Serious measures are required to taken to revive the fortunes of the MF industry and all those associated with it. Let us organise an online signature campaign and send the results to authorities concerned

Only Trail module is a good suggestion but at first instance it should be option like - OPT or NOT OPT for service charge of 100/- per transaction.Still I think these are only petty exercise,first and most important is the LACK of confidence in customers, how to restore this is a million dollar question??

I feel the need of the hour is trail only model. All the points suggested by Mr R. Srinivas Kumar of Hyderabad makes a lot of sense. Today the situation is : 1) clients dont have any confidence in equity. 2) Confidence level of IFA''s have come down and very few people are actually selling( i have written selling because IFA''s are only sharing MF if client is asking) very less MF. 3) We all want to make the MF as a brand like FD to investors. We are unable to do this for over 10 yrs now. But whatever has not happened for 10yrs will not happen now- is not true. We all need to REFRAME the system. How can the confidence be raised. How can we ensure a minimum return. And how can we save clients from the CHIT funds. We all need to work seriously on MF distribution and specially to the B15 locations. I feel for B15 locations upfront should be there but at least in city like Kolkata one should have Trail model also. SO that any IFA who wishes to have an option of only trail model should go for it. Time will say which model will have more takers and then the decissions can be taken based on that. But in first place to have both trail model and upfront model together is required.

Having no entry load , upfront commission is injurious to the health of MF industry. It will always be better if other AMCs also follow the initiative by Templeton and Motilal Oswal. Abolition of Exit Load will also empower the investor which is the need of the hour.

Dear Sirs, Greetings. The trail commission variation from AMC to AMC though it is not even, it evidently vivid that the AMCs are benefitted by reducing the trails by upto 0.05% 0.06% to a stagnated level at their end. As pointed out by Mr KLV Rao, the matter may be taken to the concerned AMCs by Galaxy, stating that while FT is paying 1.1% trail commission why not the other AMCs? Let us hope the for best outcome ? Regards, C N ANNADURAI 70403

Very interesting and important. This calculation gives me strong motivation to encourage investments in mutual funds. This gives a long term investor better returns, the long term asset manager better profits and the long term distributor higher regular margins. Thanks & Kudos to all those who supports and publicize this. Companies must consider and implement the trail model soon.

Those who are serious in this profesion will be more benefited from trail model. All AMCs must consider and provide trail model soon to distributors.

Serious IFAs really need the trail model only. Those who are not supporting this movement are supporters of Upfront , Churning etc. AMCs have succeeded in creating confusion among IFAs. The wise ones have calculated the huge plus in trail model and already pressing AMCs to implement it. The less wiser are thinking that wait for some more time try maximum churning & the least wise are supporting upfront model. Here AMCs have succeeded. The MF advisors in India are really not MF advisors. Mobilizing money for investments in MFs is their aim and that is for 1-2 years maximum. Then meet the client tell them its better to switch to another fund etc. churning and the income from churning are the main thing driving this big human force. AMCs should take some solid steps to implement uniform trail model and incentivize distributors for long term assets.

Its true that the Business will keep growing consistently with more Trail pay model instead of one time upfront model. Its a WIN WIN WIN situation for Client( Always Long Term better returns), Adviser ( make Long term and Quality AUM and encourage Long term investments) and AMC which can take long term calls to deliver better returns. We also feel that AMC should increase the Trail Year on Year based on the money stayed with them for 3 years, 5 years, 10 years, 15 years and 20 Years. This will really encourage advisers to go for long term plans. End of the day AMCs also want to grow in the long run and they are there for doing business. Keep posting your ideas and best wishes to srinivas for sharing this great idea..........

Why should we compromise on this issue? Let''s take it to the all fund houses and let them come out with a solution on this. Rs.2lakhs is a big amount. Let''s not get into the trap.

This is the best way to discourage churning. Distribution expenses are higher because of churning activity. Churning increases annual Income at the cost of our clients. If a distributor churns to increase annual income, Why that amount should be paid by our clients. If brokerage structures will offer uniform rate for all years, automatically churning will be discouraged. It will not only make business profitable for amcs but also control the total amount of distribution expenses. Indirectly it will help in controlling the gap between direct & distributor plan. Win Win situation for all.

Request Reliance,Hdfc,Idfc ,Birla and other fund houses to come up with “Trail Only” model with “Higher Trail” universally for all the IFAs.

Being leaders in the Business of Mutual Funds I request Reliance Mutual Fund and HDFC Mutual Fund to give "Trail Only Model" for all the IFAs and encourage longevity of the assets that are brought in. The longer an investor invests in Equity, the higher is the probability that he will make more money and the better is the chance that there will be an increase of Brand value of Mutual Funds. It will be more profitable for the fund houses too in the longer run though there may be some temporary pain as increase in Brand Value brings in a great deal more of business than what we are getting now. Request all the fund houses show a bit of courage in moving in better direction.

Dear Mr. Srinivas Kumar, We agree with your views. Let us hope that more amcs will adopt this structure.

Dear Mr. Srinivas Kumar, We agree with your views. Let us hope that more amcs will adopt this structure.

It''s very nice to heard that a no. of AMCs have already implement uniform & higher trail model for selective IFAs all over the country .The AMCs are 1)Franklin(trail model only for all IFAs). 2) Birla. 3) Mirae Asset. 4)Canara Robeco. 5)Goldman Sachs. 6)Axis . Why these AMCs are not introducing this to all IFAs ? Why other FRONTLINE AMCs like Reliance, HDFC, ICICI Prudential, Birla, UTI, SBI etc are not considering the implementation of this new uniform trail only model. AMCs say they are now paying upfront from their pockets. Then why AMCs are not interested in implementing a trail only model ? They do not have the risk of paying upfront from pocket. If its a higher uniform trail model every stakeholders must be happy with that.

Yes, Franklin templeton doing good stap Incrase trail commission and cut upfrount Cimmission it is very good stap of long run IFA as well as AMC. Other AMC think about this. I strongly belive this stap.

AMC s must come up with the Higher trail model as Franklin did. Why is it takes so long to implement such a decision which is a huge shot in the arm for Mutual Funds Industry. It''s very disappointing that Reliance , ICICI Prudential, HDFC, UTI,SBI etc are not taking lead for this to happen .......

It''s the real need of the hour and we IFAs need higher trail model to be implemented soon. As everyone , I too feel disappointed that the top AMCs like Reliance, HDFC, ICICI Prudential, Birla, UTI, SBI etc to come forward and implement this. Trail models is a must for all serious distributors who want to stay in this business for a longer term. We request different associations to come up with comments on this please.

YES.IAM EXPECTING 1.1% AS TRAIL COMMISSION.I HOPE DEFINITELY IT''S POSSIBLE.

Top AMCs like Reliance, HDFC, ICICI Prudential, Birla, UTI, SBI and all others must consider coming up with a higher trail model immediately. we are looking for a sustainable growth in the future of this industry.

dear all friends, some reforms must needed for IFA''s ,Mr. u.k. sinha take some steps like transaction charge,upfront for below 15 cities,but its not sufficient for us , brokers not fill secure in this industry,need upfront 3%without any claw back & also trail 1% for every year, where insurance companies giving unlimited commissions[in ULIP],provide good schemes ,no any change broker option in this sector,also if their policy holder go directly in insurance company office & renewal their policy,commission credited to agent, they accepted payment by cash ,demand draft without any bankers attestation, provided stationary, tour packages ,minimum renewal charges,they care their agents properly,but our amc''s do not job like this above changes possible if all IFA get together & fight for it .

We are build up the assets for long term. So Trial is good.

yes we need to fight .Should we fall prey to the upfront commission trap and lose this kind of money.

yes we need to fight .Should we fall prey to the upfront commission trap and lose this kind of money.

all of us have to take lot of issues like these to other fund houses, like if there is an unstamped trxn slip. cams and karvy make that as direct, thus changing the broker code and thus acting as distributor and all these problems are there till the day we are not together, and wehave to form a group and let us all put some central india and get all local groups to form an all indiagroup

I have already received this type of structure since last 4 months, from 6-7 amcs.

Frontline AMCs like Reliane, HDFC , icici prudential , Birla Sun, UTI etc must come out with higher trail model and Franklin Templeton did. If AMCs are not interested to implement this higher trail model we are surely interested to shift into those ones who give trail to us. AMCs must keep in mind that IFAs are planning like this.

AMCs must reduce avoidable expenditure every year and increase the trail model for IFAs. Reliance , HDFC, ICICI Prudential, Birla etc all must implement it soon. We are joining for the industry''s survival.

Very correct and needed ASAP. Hogher Trail is very important . Industry started surviving now. But it''s disappointing that the main AMCs like Reliance, HDFC, ICICI Prudential Birla etc are not taking the lead for implementing this. Mutual Funds Cos must immediately implement the higher trail model inorder to give their lifeline, the distributors, a survival support which is essential for all the stakeholders.

AS ALL SAYS ITS VERY DISAPPOINTING THAT THE TOP AMCS ARE NOT TAKING THE LEAD TOWARDS THE IMPLEMENTATION OF A HIGHER TRAIL ONLY MODEL. ARE AMCS SUPPORTING CHURNING ? DO AMCS DON''T NEED SUSTAINABLE BUSINESS FROM DISTRIBUTORS ? WE EXPECT A TRAIL MODEL SOON FROM TOP AMCS LIKE RELIANCE, HDFC, ICICI PRU, UTI etc.

I agree with Mr Srinivas Kumar & Mr Sam Koshy. Top AMCs like SBI, Reliance ,HDFC , ICICI Pru and all AMCs disappointing us by not taking the lead for implementing a higher trail model. What is hindering AMCs to implement this ? IFAs would like to know it.

All other Fund Houses especially Top fund houses like reliance , ICICI pru, HDFC , SBI etc should follow suit as of Franklin .

Yes, I agree with you Srinivas, Upfront has a threat behind as claw back is implemented by Axis, DSPBR and other AMCs who ever AMC gives upfront, be cautious, if client withdraws his investment in un expected situations before the exit load period, IFAs are at loss despite having exit load to client in the form of CLAW-BACK of commission paid earlier. In this given times Higher Trail leaves us in peace. we can depend on the money earned no need to fear which AMC is doing CLAW-BACK in the expected commission.

Very correct. It''s important to have higher trail. Why the top AMCs cannot take the lead to implement the model for a sustainable future for all stakeholders? Do AMCs have hidden agendas to not give IFAs higher trails ? If so, IFAs must look for the ones who give the trail model. If Franklin offers it and also Franklin having Wonderfull performing funds IFAs must look positively to do business for them I think.

Fully agreed. Trail model is needed. We request Reliance AMC , ICICI Pru AMC, UTI AMC, SBI AMC etc to take the lead for a minimum trail of 1.25 % onwards.

Thank you, Mr. Ramesh Bhat and Mr. Sam Koshy for giving comments to takeup the issue.

Top AMCs must act positively on this issue. Why Reliance, ICICI Pru, HDFC , Birla Sunlife, UTI, SBI etc can''t give choice for IFAs to opt for trail model. Top AMCs are having handsome IFA AUM. IFAs must fight for this to get done. Trail model is the need of the hour.

yes friend i am convienced with this structure.all the fund houses should follow the trail model of franklin.

Mr Srinivasan, APPRECIATE your way of thinking. We must all join together and have one voice to take up such issue. Friends again I remind UNITED WE STAND DIVIDED WE FALL.

Really useful tips

I agree with Mr. R. Srinivas Kumar. The Trail commission should be in upwards of 1.25% for a remunerative and sustainable business model for both IFAs& AMCs. It is disappointing that Reliance Mutual Fund which garnered a majority of its approximately 30,000 crore equity assets through IFAs is not taking lead on such an important issue.

I feel any fund houses can easily pay 1.3 % trail commission perpetually. Every fund houses doing so much unusal expenditure.

Thank you M/S Dalapathy Finservices. Dear Mr.Sam Koshy, Claw back is done as per SEBI regulation by all the fund houses if investments are redeemed within one year.

Dear Mr. Chilukuri Rao, Does Franklin has a clawback option for this 1.5% upfront on equities first year ?

Dear Mr Chilukuri Rao, there lies the point. Now you said is correct. As all mentioned a Trail Only Model I thought its only trail for first year onwards. Nobody mentioned about the upfront given by Franklin. I was unaware of that upfront first year by Franklin . If it is so I''m sure we IFAs must fight for trail with all other AMCs. Thank you for clearing the case.

The real difference comes from the second year on wards (where there is a difference of 0.5-0.7% in trail). It is obvious that if we accumulate 5 crore assets both with Franklin Templeton Model(Higher Trail) and other fund houses, the loss in other fund houses works out to around 3 lakhs per annum or even more as long as the assets are with us and as long as they keep on increasing (both due to market rise in the longer run and our own accumulation of new assets). This loss could run in to crores of rupees for those IFAs who stay in this business for a longer period say for the next 15 to 20 years or even more.

Dear M/s dalapathy finservices , I believe there is a mis-communication here. Franklin Templeton has been paying an upfront commission of 1.5%(B-15 incentive) + a trail of 1.1%. So, there is not much of a difference in what is being paid in the first year in Franklin Templeton Model and the other fund houses that you mentioned.

Mr Chilukuri Rao, I fully object your comment. Top AMCs are giving 2.75-3.25% upfront for their open ended equity funds and not only for Tax schemes. As we are doing business on B-15 cities we get the above said percentage upfront for all main equity schemes. I suggest you to go and check with Reliance MF, ICICI Pru MF etc. Also 0.50-0.75% Trail second year onwards.

If one AMC is able to run their business by giving trial commissions, why not others? Appreciate franklin templeton for their proactiveness in bringing trial model for payable of commissions. let''s hope others follow the suit.

Gr8 initiative by Franklin. Every AMC should follow this model..

The recent failure of NFO of RGESS from different fund houses is an indication that majority of IFAs are not falling prey to the temptation of upfront commissions and are recommending products only based on merit. That leaves only two sections of people who support up-front commissions 1. The fund houses (obviously it gives them more profit) 2. Churners (This category is obviously the root-cause of the anger of the regulator and the suffering that most of the genuine IFAs faced). Let us not be confused, Trail only model is the best way forward for small IFAs, investors and the industry as a whole

Regarding capital protection oriented funds, we all know that they are hardly going to beat even inflation and are not good for investors. With the kind of uncertainty in their returns vs fixed deposits, if we fall prey to the temptation of High upfront commissions in capital protection oriented funds, we may be effectively killing our (an IFA’s) name. We are in a trust business and loss of trust of clients in us is not good for our long term business prospects. Most of the small IFAs do not deal with them in a significant manner anyway.

Dear M/s.Dalapathy Financial services, 2.75-3.0 % upfront commissions are only existent in tax savers, capital protection oriented funds and NFOs. Even if we move to Trail Only model we can request fund houses to pay commissions in tax savers as they are doing now i.e. as upfront (though it is not advantageous for an IFA in a market that is about to rise as 1.1% trail would fetch us more).

These brokerage issues will never end, better we should implement our self''s charging the customer in reasonable way

I believe, “Only Trail” model that some of the fund houses like Franklin Templeton and Birla are following, doesn’t give rise to these issues(confusion in brokerage reports) and lets us focus on our business rather than wasting our time on these brokerage issues.

We all know that upfront brokerages are being changed every month and it will be impossible to keep track of and to ascertain whether we are being paid correctly or not. With Claw Backs, it is becoming increasingly difficult and will become almost impossible to find out correctness of our brokerage report as our business volumes increase.

I Appreciate Mr. R. Srinivas Kumar for the genuine issue raised .This is a very valid point. If one AMC Can think about IFA’S why not others, let us all decide and boycott all those AMC’S. Lets IFA Association will take this issue. We will fight together.

i also in that favour all fund house come with franklin tempelton pattarn.

Mr Chilukuri Rao, Although I am a supporter of trail only model I object your comment here. You mentioned that the commission will be clawed back if an investor redeem within a year. You must know that clawback will be for proportionate amount only and for proportionate period only. You must also know that the commission for equity in top AMCs are 2.75-3.00% and trail is 0.50-0.75% second year onwards. If a customer , for any strange reason , redeem the money just after one year what will be better for IFAs ? which is better for ifas 2.75 or 1.1 ?

From the time when SEBI came down upon IFAs'' commissions, may be some personal issues were involved between IFAs and the then SEBI Chairman, I hold a bit different views. I have even changed my major occupation. Some issues must be resolved by IFAs on a collective basis: 1. Are we AGENTS or ADVISORS? FRom a long time it has been at the whims of SEBI or AMCs to call us such. If we are agents, why was service tax deducted from the payouts? for LIC agents, there is no such provision. Service tax was supposed to be paid out of the investors'' corpus and not from the agents payout. This is one big issue, no one had tried to resolve. 2. We were asked to collect certain fees from investors. Then why were AMCs allowed direct business? Entitlement to fees amounts to status of a professional who is licensed in some way and no other person without authority can do the same work (CAs, Doctors, Advocates - all have such status) 3. Instead of providing for increase in incomes, IFAs were subject to exploitation from all quarters - prices of common things went up by 5-10 times, IFAs incentives were reduced by 90%. Do we not have a right to earn an income? THERE ARE MANY SUCH ISSUES WHICH ANYONE MAY CARE TO DISCUSS WITH ME

you have raised a very imp point of trail comm started by FT but I think very few IFA S are doing buissnes with FT or they have yet not paid attention to increase in monthly comm from FT. I wish other AMC follow this model for their benefit otherwise buissness will move towards fund house who will keep investor and IFA S interest in mind. thanks for bring this topic in limelight

Dear Mr.Paresh m dand, with CLAW BACK, even if the fund houses pay upfront commission,in case of redemption they will take it back anyway. So, no point in asking for upfront commissions. With fund houses now giving monthly trail, if we go for trail only model, there will be no claw back. We can check easily whether we are being paid correctly or not.

But dear Sir, If for any reason beyond your control , investor redeem his units within one year of investments then, you are the only looser as Coveted fund house made them safe by not paying any upfront to distributor.So for earning 1.10 % you loose even 0.5 % as upfront inspite of giving him all the service to enter in to MF investment. so, all distributor should be given choice to choose betn UpFront+ Trail or Only (All) Trail model.

Our efforts and presentations to concern amc and legal body should be only in one direction - Minimum 2 percent upfront and 1percent trail across the fund houses, across the geographic location and across the different schemes in equity to survive and have sole reason to strive and stick to this bussiness.

hi, yes you are right. but we will listen our words. amcs are playing games with ifas along with sebi.

As Franklin Templeton has started this trail model, why not other AMCs?There should be uniformity in commission structure for all AMC''s and the higher trial is use full for IFA''s in long term survival rather than upfront commission with lesser trial.

I am ramakrishnan, I am doing mutual fund business last 20 years, in franklin templeton mutual fund In Tax Gain scheme the upfront commission is 1.5% they are paying the commission in quarterly dividing the 1.5% all other mutual funds are offering in march up to 6% as upfront commission there is no trail commission for the remaming perid ,the there is no glaback for tax saving schems because locking period is 3 yerars, so the franklin templeton mutual fund chiting the IFAs , if the stock market is improve the IFAS are getting trail commission @1.5%, the current year Franklin templeton change is commission structure for Tax Gain as a up front 1% and Trail commission is 1,4% the cost of living is very high the amcs are reducing the connission , my request dont sell this type of mutual fund schemss

BETTER TO BRING THE ISSUE TO ALL BIG AMCS TO RETHINK THEIR STRUCTURE MODEL AS ALL TRIAL BASIS.LET US DO THE BUSINESS WITH THAT AMCS WHO SUPPORTS OUR REQUESTS.

dear all we will go for trial commission , but this upfront commission is also perpetual ,if investor redeems the assets in the first year ,then AMC''s are clawing back the upfront commission

Mr. R. Srinivas Kumar explains us how IFAs are being taken for a ride. Who is benefiting then? Aren’t the fund houses trying to negate the spirit behind SEBI’s permission for increase in expense ratio? Is there any law which is stopping bigger fund houses from paying the commissions that are commensurate with the increased expense ratio? It is time that we have Trail only model and that too uniform trail across the industry to eliminate all the evils like churning etc., associated with the industry.

Fund houses are charging the clients an extra 0.5% (due to the increase in expense ratio by SEBI) in the name of propagation of Mutual Funds (supposedly for making the Mutual Fund business more remunerative for IFAs). Clients are paying the increased expense ratio anyway whether that increase is passed on to the IFAs as increased trail or not.

It is very difficult to convenience the investor in this market. Our aim is to create more wealth of Investor and at the same time our income should be increase. The FT has done a good initiative.

SIR, ITS VERY UNFORTUNATE WHAT IS HAPPENING. FUND HOUSES ARE PLAYING WITH US. WE NEED FIGHT FOR HIGHER UPFRONT COMMISSION & TRIAL COMMISSION. OTHERWISE NO FUN IN DOING BUSINESS. TRULY, CHANDRA

It is very good for all IFA do business in which AMC fund performance is good. Franklin as fund house is very good and franlin is pioneer to launch such type of scheme.

Thanks for this update. It is very important information which you have provided. I will revive my relationship with FT.

Look at how many days these trial commission drama continues, the commitment from the AMC is not very clear.

If this happen it will satiesfied the IFAs and increase the MF Industry.

Hi Sriniwas, Don''t go to high or low AMCs. Just think that how you can create more wealth and grow your client''s money fast in appropriate fund. If you talk of HDFC sip and Mirae sip, if anybody has done a sip of Rs 5000 for the past 5 yrs, you are losing a whooping amount of Rs 3000 per year on trail in hdfc amc and your client is also unhappy that such a large fund is giving such poor returns. Study the funds yourself first. That era has gone by when we use to invest on fund''s recommendations. Now you yr client needs your advise not fund house advise. Anup Agarwal ARN-2874

THIS IS A VERY VALID POINT, IF ONE AMC CAN THINK ABOUT IFAS WHY NOT OTHERS, LET US ALL DECIDE AND BOYCOTT ALL THOSE AMCS WHERE IFAS ARE TREATED WITH SCANT RESPECT, WHERE MONETARY MATTER ARE LEFT UNDECIDED, BIRLA HAS UNIQUE PLANS FOR IFA AFTER A CERTAIN AUM, VIZ INSURANCE -HEALTH AND LIFE AND ALSO CREATING PENSION , WHY CERTAIN AMCS DO NOT BOTHER IT ANYBODYS GUESS, START BOYCOTTING AND THEY MAY BE SET RIGHT, THERE ARE CERTAIN AMCS WHICH PROMISE HIGHER ADDITIONAL INCENTINVES UPON BULK BUSINESS BUT THESE PROMISES TAKES MONTHS TO MATERIALISE, WHY SHPULD AN IFA BE AT THEIR MERCY, I HAVE DECIDE TO WORK FOT THOSE AMC WHICH CARE FOR IFAS FUTURE

Why IFA associations are not taking this up ? Are we fools enough to shut our mouth? Why the comments in this discussion is not going up fast? Are IFAs thinking that let''s simply sit and watch. Let others comment and I don''t have time to waste ? Hey ! The so called advisors ! Shame on you . There are big shots and total IFA number is 15000+ in this industry , not even 50 have put a word. Behold ! you are removing earth under your own feet. And you are aware of it too. !!!!!!

Very simple. Sell only Mutual Funds from Franklin for a month, then automatically other AMCs will start to pay only trail.

Good to see large no. of comments in short time i hope other IFA friends will also join to express their comments on the issue.

NO. MR SRINIVAS KUMAR MUST FIGHT AND GET HIS STATUTORY TRAIL COMMISSION FROM THE RESPECTIVE AMCS. C N ANNADURAI

True. Also some fund house is no exit l entry load started. And still paying us brkrge..

We all request Wealthforum to take answers from amcs & regulators on the issue. It is need of the hour.

in private discussions i have been propagating perpetual trail commision for quite some time. it will act as a deterrent against frequent shuffling of portfolios ,benifit both the IFAs as well as the AMCs as it will bring long term money in the market . FT have done a cmmendable job by taking this step and if this is followed by other amcs it may change the fortune of MF industry.

Dear Mr srinivasan Thanks for raising such hot issue in favor of ifas. Now th time has come for ifas to think twicely before working for any amcs. most of them traeating us like helpless person. we should plan for our long term benefits instead of short term lures. you may click on link provided for your valuable suggestion n coment. http://www.wealthforumezine.net/ForumComments.aspx?id=288

in private discussions i have been propagating perpetual trail commision for quite some time. it will act as a deterrent against frequent shuffling of portfolios ,benifit both the IFAs as well as the AMCs as it will bring long term money in the market . FT have done a cmmendable job by taking this step and if this is followed by other amcs it may change the fortune of MF industry.

The earlier system - pre entry load removal- with upfront and trail was cery good for all. Investors never cribbed being charged entry load and advisors never faced the hassles of collection of advisory fees from the investors. Reluctance of investors to part with fees is not uncommon especially in flat markets.So, many advisors are left with only trail commsission which is far from making both ends meet make both end meet. It is wish ful thinking to expect return of entry loads. Since sale of most financial products run on the distributor model AMFI should figure out assured income to advisors in all market conditions. Advisor fees should be made MANDATORY rather than OBLIGATORY

The way the AMC''s are giving commissions is not good for the industry as a whole. They are not encouraging healthy business. If we do any investment today, they give certain commn. say 0.75%TRAIL for the current quarter to a scheme, later in the coming quarters or months they give only 0.25%. if the average assets stay more than a year then it will be 0.25% or may be less. What the fund houses are doing is, they are encouraging churning indirectly, if any advisor does not do churning he will loose certainly. As the investments are coming very slow and small in size, what is the option left to the advisor.... we are not govt employees to get salaries whether work done or not.... and also if elections are coming then their D.A.''S, SALARY REVISIONS WILL HAPPEN..... and for us who is going save us from the inflation and industry weakness..... Every AMC should introspect themselves and give better commissions and incentives and TRAIL....so that churning is not encouraged and long term investments are encouraged...... And finally, its very horrible to see that quarter on quarter or month on month commissions or trail changes scheme to scheme.... and its very difficult to check and do the business heartfully............

THE COMMISSIONS/TRAILS/INCENTIVES ARE CHANGED FREQUENTLY FROM TIME TO TIME AND AS SUCH WE CANNOT COMPILE THE SAME. IN ONE SCHEME WHICH I HAD INVESTED LAST YEAR I AM GETTING A TRAIL OF 1% BUT ON THE OTHER HAND WHICH I HAD INVESTED IN THE YEAR 2007,2008,2009,2010,2011 I AM GETTING THE TRAIL OF .40% AND AS SUCH I AM LOOSING A BIG AMOUNT. IN THE INDUSTRY PRACTICE IT SHOULD BE SAME FOR ALL THE MUTUAL FUNDS.

Defenetely its a valid discussion. Every one should raise their voice on this issue with all AMC''''s. So that in some time AMC''''s will realise the fact and value the long term assets in the industry.

It will be good to have a trail commission of 1% or more perpetually across all AMC rather than having upfront of .5% & trail of .5% . As Franklin Templeton has started this , why not other AMCs.

All the AMCs should follow example of Templeton amc. They should pay only trail commission. Thanks

This discussion is quite valid and should end with some result. As far as Mr.C Satish kumars comment I totally disagree that AMC like Franklin with all trail model is charging from the clients or the scheme, here you can compare the return of equivalent schemes of other AMCs with Franklin Templeton(which is also a very big fund house). A Few, I won''t name, so called the BIG AMCs, but EOD the returns as well the brokerage (upfront & trail) for IFAs is less. We should only see from the end of an IFA because of these 2 reasons. 1.this discussion forum is for the problems related to IFAs not AMCs. 2.there are many people to look for & care for AMCs and to make them a profit making entity. Nobody is serving us free lunch, they are quite smart to squeeze out good profit for themselves. Now its time to take your own decision that for which AMC you should work to get maximum benefits for you and your clients.

One trait that has not changed in fund houses in all this while is their rigid attitude and their resistance to change. It is the biggest stumbling block in the growth of the industry. Otherwise we would not have these many problems/service issues in the industry for this long. We all know that the regulator has given 0.5 % extra leeway (0.3% + 0.2%) to charge clients and propagate mutual fund business. They are certainly charging it to clients and keeping it for themselves. How would they propagate business without sharing the increase in expense ratios with the IFAs? Wish fund houses be a bit more honest and come out with Trail only model.

Yes, Srinivas kumar you are correct always trail is best I preffered only trail

Appreciate Mr. R. Srinivas Kumar for the genuine issue raised. It is unfortunate that the Biggest Mutual Funds are shying away from the real reforms in Mutual Fund industry and are trying to confuse IFAs with up-front commissions for their short term benefits, sacrificing the long term growth of the industry. Up-front commission creates an environment for churning. If there is no upfront commission, there is no chance for churning and there will be no chance for frequent regulatory intervention (which obviously is not good for the small IFAs). Hope all fund houses move to Trail only model.

its very pretty being in financial advisor industry the advisor is being looted. every ifa should think him self also before advising to the client.as said funds may be same in big house and franklin templeton then why should not ifa think his future.

ft ki geneuity pe swal hi nahi big fund house wait for lossing nos. then they start

You certainly have a valid point. Regarding Mr.Bapat''s comments - An IFA must think of his/her commission,what''s wrong with that ? If an investor/client is ready to pay Proper advisory fee an IFA will suggest a direct plan to such a client. Those advisors who are still Alive after last 4-5 years of market turmoil will definitely put investor interest first.

Defenetely its a valid discussion. Every one should raise their voice on this issue with all AMC''s. So that in some time AMC''s will realise the fact and value the long term assets in the industry.

Actually best solution is uniform rate of commission for all years. If in 1st year U% is paid as upfront & F% is paid as 1st year Trail, total of both (U% + F%) should not be more than trail (S%) 2nd year onwards . U + F = S. So if amc is paying 1.1% in first year, trail 2nd year onwards (till the assets last) should be 1.1%. So P. A. income will be equal in all years. This issue was raised in my discussion BROKERAGE STRUCTURES ARE FAIR TO WHOM? dtd 04-11-12. http://wealthforumezine.net/ForumComments.aspx?id=43 This concept will protect CLIENT''s interest. Many amcs have started offering uniform rate for all years.

I think if Franklin can then why not others.

Each Amc should pay minimum -2%commi.for first year,&1% trail for second year&on wards for the rest of years

numbers of ARN not renewed because of commision structure . so we can see the loss of AUM of MF industry from last 3-4 yrs. sebi is not doing anything to encourage IFA, if IFA IS TOTALLY DEPANDANT ON MF SALE HIS FINANCIAL POSITION WILL BE VERY POOR IN COMING TIME. INDIA WILL NEVER BE INDIPENDANT . WE WILL BE ALWAYS DEPANDANT ON FII. & INDIAN PEOPLE WILL NEVER EARN FROM EQUITY MARKET DUE TO SEBI POLICY

Funny discussion point and against the basic principles of advisory. In this forum I have seen people do discuss all these issues on commission. Here Mr. Srinivas says " Should we fall prey to the upfront commission trap and lose this kind of money?". The 1st thing is how an advisor can think of his income while suggesting any scheme? Is it in the interest of the Investor? if not such questions need not be discussed

franklin has done goog start in the favour of investor and advisor so that the fund will not be churned at regular basis yearly

U are correct I think they are also listening the same. let us hope.

Everyone are looking only from the shoes of an IFA. Have any one dare to see the whole situation from the AMC''s shoes. The ANSWER is a big NO. Under the present regulations of the SEBI the upfront and any other marketing incentive are paid from the pocket of the AMC and not from the scheme. Trust this will be agreed upon by everyone. Now the second point is the trail (lesser trail in words of you all) were charged to the scheme. (Trust no difference of opinion here also). Now if AMC pay you higher trail he will charge all the commission to the scheme only and he pays nothing from his pocket. So that at the end of the day he gets what he has to get. So WHAT IS THE RESULT. IN today''s context there is a NAV for all schemes called direct NAV. If you follow all trail model the gap between the direct NAV and Advisor NAV will be higher thereby giving more better returns through the direct NAV investments. IF the gap is larger day be day will you be in a position to get more business. So who is the winner at the end of the day. IT IS NONE OTHER THAN THE AMC. Because now he has axed two mangoes with the help of one stone. (one is the IFA or distributor and other one is no expenses from his pocket). The bottomline is please note, no manufacturer will ever manufacture a product at a loss. I dont see any benefit to the IFA in this in the long run because of various other factors. Let us discuss the same separately.

franklin templetion always thing new for IFA and always brings new scheme for investor. also he want long term benfit for IFA and investor relation, in my view all amc thing about it and make rule if investor exiit within one year amc charging exit load so amc will pay distributor upfront commission at exit time within one year for IFA benfit.

Yes very true, but to whom we can trust. No body care about IFA. Customer is not ready pay upfront and amc always wants to cheat the IFA. So nobody bother about IFA''s concern.

It''s good for the IFA''s and the investor and for the industry as a whole to have only trial & no upfront and any other incentives in the first year.

In my opinion, all fund houses should adopt the model of FT but unfortunately they are not doing so. God only can help us !!

Dear Mr.Parameswaran, if the investment is withdrawn within one year, as per the current system of upfront commissions + CLAW BACK, the commission paid will be taken away from us anyway, so no specific advantage for up-front commission structures. Regarding redemption after one one year, we know that there is no up-front commission after one year, so we need not bother. We certainly lose trail from the second year on wards(as most of IFAs assets have a life span of 2 years are more as per research, the assets brought in by IFAs are the most sticky) if we don''t go for all trail model as explained in the discussion topic.

The Gap Is even more wider if we compare with smaller fund houses. more over the structure offered to National Distributor are far higher compared to IFAs though some Ifa are very professional, qualified and provide best quality services in real interest of the clients. This discrimination is existing for too long and no one ever complains. Its high time we IFA get a level playing field with National Distributors keeping in mind that we offer personalised services and try to create loyal and satisfied investors which is needed for expanding investors preference to Mutual Funds.

There is another breed of Fund houses which are still undecided on whether to pay new structure of commissions on existing/running SIPs. Since B-15 advisors have got a jump in upfront commissions after recent hike allowed by the regulator, AMCs like HDFC have been graceful enough to immediately implement this hike on both new lumpsum business as well as existing , running SIPs as these SIPs also bring new money virtually. But some other big AMCs have not implemented this till now and are ripping off IFAs by charging the investor a higher commission on the one side and not passing on the benefit to the rightful advisors on the other side. We all know who this company is but nobody is raising voice till now. Why?

The suggestion is most welcome, but the problem is that if we go for only trail, in case an investor withdraws his investment within a year or just after completion of a year, the IFAs will get nothing. However, the IFA is sure that the asset will remain for a longer duration - say 5/10 years - this model will be ideal. The choice should be given to the IFA and not thrust upon him.

There should be uniformity in brokerage structure among all AMCs. Why different AMCs paying different brokerage structure. Every where there is set of rules and regulations. It should be applicable here also. AMCs are cheating paying brokerage properly. It requires to deal with properly. Particularly HDFC AMC is very clever. Whether they are doing calculation manually or by computer. When I asked to representative of HDFC AMC Hyd, this is our general practise. Who will give solution? Whom to approach for this problem?

If we add to it the fact that upfront commissions may be misused by some unscrupulous distributors even now is a bigger threat to IFAs as if churning happens due to these upfront commissions(which are not the liking of the regulator), the regulator might take even harsher stand(we know what happens when we attract the regulator''s wrath, don''t we?). We all know that majority of churning is through institutional distributors and not through IFAs. But, we all end up suffering due to the mistakes of a few as we did earlier too. Let us say no to upfront commissions, let us not give a chance to the regulator to be harsh on us.

Very simple. Sell only Mutual Funds from Franklin for a month, then automatically other AMCs will start to pay only trail.

From the second year onwards with only trail based model, all the IFAs (both new and existing) get 0.5 -0.7 % more trail commission(a total trail commission of 1.1 % or even more). Obviously the loss is huge for both new IFAs and existing IFAs from the second year on wards. If all of us are losing, who is gaining then? Who is resisting the all trail model? Who wants our confusion to continue? Fund houses. Shall we be in this trap of upfront commissions forever?

If we look closely in to what Mr. Srinivas Kumar raised, we would know that whether they pay upfront + trail or only trail, they are paying only 1.1 to 1.2 % in the first year. So, there is no variation for a new IFA and an existing IFA in terms of what they get in the first year.

Agree with you Mr.R. Srinivas Kumar. IFAs are being taken for a ride by most of the fund houses with their confusing brokerage structures. We all are put in such a situation (with frequently varying upfront commissions etc.,) that it will be very hard for us to understand what the fund houses are paying us. We are so confused to believe that upfront commissions are in our interest (at least some of us believe that they are in the interest of new IFAs ). It is to the advantage of fund houses that we are confused (as we can see above, lakhs of rupees that large fund houses are not paying us due to this confusion) and hence they are putting in every effort to make us more confused.

Very relevant discussion topic Mr. R Srinivas Kumar. As long as AUM churning exists the trail model will be unpopular. AMCs , if pay only trail will be losing the balance money in the future. So big AMCs will not accept this proposal. Those IFAs with less AUM will be benefited by upfront model. But those IFAs having handsome AUM will be surely benefitted only by trail model given the condition that these IFAs are not churners. I''m sure big AMCs will not accept the trail only model. But we must fight for this. There should be options/choices to choose. If one want trail only then he/she can opt for that one. IFA associations must press AMCs to make this in practice.