WF: 2009 has been a year of tremendous recovery for market but its been a fairly difficult year for the distribution fraternity. Even as the mutual fund industry AUM scaled a new high of 8 lakh crores in November, that cheer unfortunately did not permeate to the distribution fraternity. How have you positioned your business since the entry load ban that happened in August 09?

Venkitesh: We have positioned Mutual fund business as a advisory oriented, charge based system. We have been moving towards a charge based system as we realized that it is only a question of time that this kind of changes would happen. So already the organization was internally gearing up for this. But this does not mean that things are honky-dory. We have to deal with challenges - because the eco system where we are recruiting people is having issues adapting to this change. In my view, employees perception of the issue and employees conviction to levy a charge is the root of the problem. Bulk of the clients are ready to pay - only 10-15% are resisting - which is bound to happen. We charge between Rs. 1500 to Rs. 2500 per annum for mutual funds and clients can do 'n" number of transactions. We also really pushed up the quality of advice we give to our clients. This has worked very well. For clients who are not very active, we levy a transaction charge of Rs. 50 per transaction. Clients are willing to pay this as it is far cheaper and more convenient than going to an AMC office, paying taxi and auto-rickshaw charges and the time and effort involved.

We are settling down well with this new model - in fact I must say that November was a really good month for us because we saw record hike in number of applications and in collections.

WF: In the last quarter, what proportion of your company's revenues came out of mutual funds? How does this compare with 2006 and 2007?

Venkitesh : Bulk of our company's income - around 70% comes from brokerage. If we take distribution as a business unit it used to be 65% in mutual fund and 35% in Insurance in 2007. Now it is 80% in insurance and 20% in mutual funds.

WF: One of the issues on the mutual funds side is the net outflows over the last 5 months although the markets have been moving up very rapidly. What can be done to reverse this trend of net outflows and what in your opinion are the biggest challenges in getting the investors to buy into equity funds?

Venkitesh: You cant stop redemptions because the customers have stayed invested for 2 to 3 of years and now they are getting a chance to exit with some gain or atleast moderate gain. If clients book some profits and then reinvest in lower risk options like MIPs, there is nothing wrong with that - we are happy to see clients book profits after a long wait.

We are also encouraging SIPs - because that is the best way to build long term wealth.

The bigger worry for us is that we would like to see more momentum in adding on new clients into our system - that is not happening at the pace I would like to see.

Ours is a retail business - we haven't seen huge redemptions that any HNI focused distributor or bank would have seen in recent months.

WF: The other issue is that NFOs are not getting anywhere near the kind of retail participation that we saw a couple of years back. Why is this happening?

Venkitesh: From a distribution commission angle, there is hardly any difference between an NFO and an ongoing scheme. We are focusing on selling good schemes with a solid track record. Our employees have made that transition quite well.

WF: Are you going to use the stock exchange platforms for your MF business?

Venkitesh: Yes, we are gearing up for this. We are a brokerage firm and have the necessary systems infrastructure to support us. We will use it for transaction execution with advice being separate and paid for. Another model would be a combined advisory and execution model with trainer personnel at the terminals. Charging clients will become very convenient as 80% of our distribution clients are also our broking clients.

WF: from the industry perspective now that you have the trading platforms from stock exchanges would you say that even if smaller IFA's exit the system brokerage firms like yours will be able to ensure retail penetration?

Venkitesh: Brokerage firms who has invested in people and training and systems and who have a commitment towards this business would be able to do it. It you are a offline brokerage firm only interested in transaction execution in the same mind set you won't be able to.

WF: What are the key trends you see this year for the distribution business?

Venkitesh: Entry barriers in the distribution business have now come up - they were non-existent earlier. Now, you need a decent capital base, you need to have adequate technology and the gestation period has increased. Consolidation is bound to happen as a consequence.

For retail focused distributors, the key is ensuring that you have a technology platform that helps you manage a growing business effectively and one that does not come in the way of growth.

WF: What are your plans for 2010 - products, client segments, new services?

Venkitesh: In addition to equity funds, we are also focusing a lot on MIPs. We are also encouraging our employees to look at client needs more holistically and not be very product focused.

WF: Any plans to set up an HNI oriented service?

Venkitesh: No - not at the moment - not in 2010. We will gear up for it at some point - but that is not an immediate focus area.

WF: What would be your key messages to your AMC partners as you begin the new year?

Venkitesh: There is consolidation happening in the distribution business as well as the AMC business - market shares of the larger players is increasing in both businesses and smaller players are getting marginalized in both businesses.

We are seeing increasing focus from AMCs in engaging with serious and committed players like us. My message to AMCs is : step up the engagement and focus on training our team. These are the two key drivers that can yield good results for both of us.