Super article! You are spot on!

As usual, excellent analysis and suggestions. But, Vijay Venkatraman sir, does the SEBI even care to go through these suggestions??? A big no. I, so do most IFAs, would not mind TRAIL only. Do away with the Upfront, but trail is an absolute must.

great thinking thank u sir it is a betterway out for SEBI and a face saving one as well for AMCs who were behind all these mess created earlier LOL

As usual, excellent analysis and suggestions. But, Vijay Sir, does the SEBI even care to go through these suggestions??? A big no. I, so do most IFAs, would not mind TRAIL only. Do away with the Upfront, but trail is an absolute must.

Very well analysed and well articulated..every serious IFA is keen to morph to protect his business interest and investor interests... IFAs' sustinance depends on his ability to take care of the clients requirements on continuous basis.. some of the IFAs are as old as the industry itself and they have gone through more rough patches than the industry itself, they were able to retain the clients during the hard times and it does not happens by not providing right advice.. while we all appreciate the efforts of SEBI in moving towards the professional advisory model...but should come in stages where each and every stake holder can adapt to the changes. In my opinion, the TRAIL should continue may be in a much evolved fashion which ensures the quality advise to the customer. Why AGENCY model should exist if SEBI feels it as conflict of interest. Let SEBI introduce the advisory model in phases, ensuring that the transition is not hurting the distributors.

Sir, Our view is SEBI should definatelly consider the efforts put in to generate AUM from last so many years by advisors.. Long term Trail is a better solution along with stages of advisor levels...

Dear Sir, I suggest for ONLY TRAIL commission to ALL financial products including insurance, co fixed deposits & mutual fund as well. This rule will enable agent / advisor to convince the investor properly & will not unnecessarily churn the investment just for getting upfront incentive. Now my Vital Question to Mutual Fund advice. What's an advice? To invest in XYZ scheme of ABC Mutual Fund where the IFA has no control / voice over the fund scheme. The Fund Manager manages the portfolio of a particular scheme as per scheme objectives as per SEBI guidelines. Do really they do? Even the Fund Managers get changed in the course of time by AMC. IFA has the duty only to tell the investor the scheme objectives / nature & if it suits the investor, he can suggest that scheme. Therefore, IFA /Agent/ Advisor whatever you may call has every right in the form of trail commn which should form a part of AMCs annual recurring expenses which are capped as per SEBI rules.ONLY TRAIL FOR ALL FIN PRODTS

First of all instead of going into detail we all to analise weather our product is being demanded or pushed to majority of clients? if one give a true answer than SEBI will find the answer. except Metro town Mutual fund products are not in demand. it is a big reason why distributors are vanished from tier 2 tier 3 towns. Please do not try to catch bull by horns. go into the root cause of problem.

Dear sir, good views i agree with you

Very well said, Vijay. I agree with you.

My personal view is remain agent.

We will better be as Advisor than to be roped as agent.Near to extinction this category of IFA will find its way to other prfession. Keshari

Iam an IFA of mutual funds since 1982.Iam selling the sutable products according toinvester's needs.Upto the year 2008 I got suffcient investments from clints and more or less brokerage from the AMC. But now after SEBI'S guidlines 60percent of the IFA'S are in out of range. this happend dew to ridiculous policies of SEBI'S earliear authoritites. many of the IFA'S lifestyle decreesed. so my request tO SEBI to stregthen the MF industry to reinstate the commission upto the level of year 2008 and continue the trial commission as it is. PROTECT THE INVESER INTRUST PROTECT THE IFA INTERST

Dear Vijay Sir, It is very well articulated and explains the concerns we face today , SEBI should treat your response as a neutral opinion and should emphathise with IFA's who are the last mile access to individual retail clients, We are open to change but with a "live and let live" environment where we also get motivated to advice and serve in the best interest of the clients . Thank you once again for the apt response .

To my mind, any regulator should first consider the ground realities of her country. Considering the low levels of penetration of MF, the first priority should be to grow and strengthen the industry! Do we have any substantial data proving that investor interest is being affected due to this so-called conflict of interest? Or are we raising a false alarm, seeing the trends in the west? SEBI should protect investor interest alright, but what happens to 'customer beware?' Should we oscillate to extreme opinions based on sporadic evidence and vociferously prosecute a kid-glove approach to investor interest rather than educate the investor over a period time on the one hand and exemplarily punish the wrong doers on the other? Knee-jerk reactions will not take us anywhere!

I hope majority of distributors accept your view point.

Thanks vijay, Very comprehensive and well thoughtout article. Paying trail to everyone and only advisor is allowed to charge directely from Investor & Grading of advisor via NISM is a brillant idea. Hope someone is listening.

Sir, It is really well drafted, I am confident your suggestions reflect the feelings and mind set of the majority distributors. I am sure sebi will take closer look before bringing out the final change.

DEAR SIR,I AM AGREE WITH YOU.IN OUR COUNTRY PRESENT SITUATION IS DIFFERENT TO OTHERS.WE ARE IN GROWING STAGE.WE NEED SOME PREFERENCES.IN MY OPINION ALL FINANCIAL PRODUCTS LIKE INSURANCE,NBFC INVESTMENT,PROPERTY DEALING,SAHARA'S INVESTMENT PRODUCT,AND ALL OTHERS SMALL & BIG COMPANY'S PRODUCTS COMMISSION SHOULD BE REGULATE BY REGULATOR.ALL KNOWS THAT MISS SELLING IS NOT APPLY IN ONLY MUTUAL FUNDS.COUNTRIES PEOPLE WITNESSED TO LOT OF MONEY LOSE IN HELIOUS,JVG,GOLDEN FOREST,RAPTI GROUP OF COMPANIES ETC. THE REASION IS ONLY GREED OF HIGHER RATE OF COMMISSION.THIS PICTURE ALSO RUN IN PRESENT SEEN.THAN WHY SHOULD NOT STRICT OUR SYSTEM?ALL IS ONLY FOR MUTUAL FUNDS!I SUPPORT SEBI STEPS & UR RECOMMENDED APPROACH.THANKS.

A very good views raised point by point. Good one keep it up

First of all instead of going into detail we all to analise weather our product is being demanded or pushed to majority of clients? if one give a true answer than SEBI will find the answer. except Metro town Mutual fund products are not in demand. it is a big reason why distributors are vanished from tier 2 tier 3 towns. Please do not try to catch bull by horns. go into the root cause of problem.

dear vijay, u have nicely raised almost all the issuesrelating to sellings of mutual fund schemes.abolition of upfront and increment of trail comission will definitely abolish missellings of banks to a certain extentwhich put a targets on their RMs and sales people which sometimes unacheivale which they are forced to do to maintain their services.This fact is infact genesis of unfair practices.However,a retail distributor too can not fetch business without the upfront commission in the days when rate of petrol is over @R. 72/litre.So some sort of emolment is necessary to be paid to compensate day-to day expenses

dear vijay, u have nicely prraised almost all the issuesrelating to sellings of mutual fund schemes.abolition of upfront and increment of trail comission will definitely abolish missellings of banks to a certain extentwhich put a targets on their RMs and sales people which sometimes unacheivale which they are forced to do to maintain their services.This fact is infact genesis of unfair practices.However,a retail distributor too can not fetch business without the upfront commission in the days when rate of petrol is over @R. 72/litre.So some sort of emolment is necessary to be paid to compensate day-to day expenses

Mr. Vijay, Very well put. I fully agree with the question mark put by you about banks people & RMs of National Distributors selling MFs. This is the area of concern as far as mis selling is concerned.

Sir, Excellent write up. Do SEBI think that the changes brought in so far has resulted in protection of investors interest and the Equity AUM has actually seen the growth? Apart from investors protection the objective is to promote growth and let their time and energy be devoted to this cause than the new found conflict of interest.

Yes ,I do agree with you all guyz,Bank should b banned for selling thE MF,This is only cause of misleading and mis selling which is effecting the business in all aspects...

Vijay, Very well put. From our side, I think we would have achieved a lot if SEBI agrees to dispassionately consider these suggestions and have a discussion around them.

sir i think they should abolish upfront,increase trail.they should kick all uneducated advisors who have passed by unfair means.they should aiso ban banks to sell mf,because they arethe one who are doing mis selling.

Advisory profession can run only & only in areas of lack of knowledge and less availability of data... Doctors/lawyers can charge fees only because most(clients) people can't understand the subject and importantly their field is science and or written acts.. The result dependeds only upon professional skill.. They are not allowed to advertise and the subjects of advice are rarely discussed in public. Therefor the client/patient has to consult them.. Generally, people do avoid them at starting level.. Consultation takes place only if the problem continue for longer time.. Finance field is field of everybody and tragedy is--a scooterist go to give advise to a person who uses luxury cars. Secondly the advisor's advice may not (mostly) yeild explained results as result depends upon AMC/FUND MANAGER/MARKET CONDITIOED/ POLITICAL & EXTERNAL CONDITIONS AND LOT MORE.. Financial Advisor has no control over such conditions.. And therefore finance advise can not be paid for..

Dear Vijay, Congratulations for the good job and thanks for your efforts. I wish to highlight the following important issues to the all concerned: a) SEBI lacks the jurisdictional authority to licence investment advisors for 'all financial products'. If SEBI goes ahead with the concept paper as-is, it is bound to rekindle a turf-war all over again. b) In most of the developed countries, a law has been enacted by respective law makers. In the public interest I would urge our law makers too to step in and discuss the issue in the parliament. This is especially relevant in view of partial decimation of mutual fund industry after entry load is banned. c) SEBI should undertake a cost-benefit analysis of implementing the proposals made in the concept paper. The perceived benefit to the investors after the entry load was banned has not helped in increasing the investments. Let SEBI come with numbers for the current one and allow public debate based on data.

Sebi is intellectual bankrupt people organisation.they don't want retail investors in Indian market.they are promoting FII or QIB or recently introduced new category for foreign investor.In India financial literacy is still distant dream,hardly 4% of household income is in stock market or mutual fund.By coming out with unnecessary regulation they want to kill MF Indstry.

Thank You Mr Vijay. Just abolish Upfront make payouts by Trail will solve almost all the problems.

The ground realities of the investor-advisor relation in the mutual fund industry have been clearly brought out here. Hope the regulator's office is all-ears for these views, which one would think should have come from their think-tank in the first place. Financial Planning and its execution are best done in the clients interest by the client's own trusted advisor. Frustrating that the regulator's think team needs to be nudged to see these basic ground realities of their own industry. Parag Karia, Bangalore. Oct 31,2011

well thout out.SEBI decision makers should really think of all aspects before proceeding.

if it does not kill the agent/advisors, then there is a better way..shoot them all..

I AM IN COMPLETE AGREEMENT WITH THE ABOVE VIEWS. I ALSO THINK CFP FROM FPSB SHOULD ASLO BE CONSIDERRED FOR QUALIFICATIONS. I HAVE NOT COME ACROSS ANY WHERE, BY ANYBODY MENTIONING ABOUT CFP. RECORD KEEPING SHOULD BE GIVEN HIGH IMPORTANCE AND SHOULD BE POLICED OR AUDITED ON REGULAR INTERVALS. THIS SHOULD ALSO HELP BRINGING DOWN WRONG SALES BY ADVISORS, AGENTS, DISTRIBUTORS ETC.

Sir You have given a very good article & we are in favour of good trails & little upfront. The ring should bell in Sebi's office.

Great Effort. Very well articulated and presented precisely. Further, not sure of the environment for an Individual Advisor - we are finding great difficulty to obtain any info or data from any Institution we do not represent/suggest. For ex. getting information about all the Insurance products from all companies is next to impossible,if you want to provide a neutral advice to the client and less is said about servicing them. It may be impossible to implement the expected model in India so soon.

We believe that multiple share classes ( offering a cheaper version of the same scheme) will be a very good alternative. It will give a good boost to fee based business. Alternatively, like in UK, a level playing field where there is no commission at all for anybody will be also effective.

Dear Vijay, It cannot be more lucidly put.You have articulated all the problems the IFA community is facing & is going to face if the concept paper becomes a reality.We now wonder whether we are an IFA at all.Thank you so much for being our advocate.I only wish the bosses at SEBI read your detailed response, with an open mind.

good sugestion at least trail commission will avoid misselling ...

Its Very Well Artcle Mr. Vijay. Only thing is that whether SEBI have a time to look at your philosophical note ?, Since they have decided what they wanted to do. One way they can avoid all conflict of interest Pay only Trail not Upfront. All Problem get solved.

Well researched and precise points. Hope SEBI and AMFI look into this. As far as a suggestion for SEBI goes "Cutting the branch it is siting on." By the way going to forgo exam for extension of license for selling MF

Sir You are bang the target. In fact i have a similar thought process. The very fact that the longivity of assets is in the interest of all the stake holders and this should be encouraged. Or else one will have to forget that advise will be for the long term. People like me who have modeled their business on this concept have loyal customers and at the same time a happy AMCs.

Very pragmatic and real solutions. Removing upfront commissions and allowing advisors to advise on products, would lead to proper analysis of low cost products before the same is recommended to the client.After all, advisory and investment execution go hand in hand, since an advisor, also understands, what best suits the clients need.

Very well drafted. Hope the regulator sees it with an open mind,rather then push it like the entry load ban, Opt in/ Opt out trancation fee case.

These suggestions are too good. I would suggest to have such kind of regulations for other products as well, like postal schemes, mediclaim etc.

Thank you Mr.Vijay for clear and comprehensive view and solutions. I hope SEBI will act to address the CoI issue only and not create challenges for both advisers and investors.

Yes, Your comments are to the point and precise. The constant changes that the industry is bringing in is not helping anyone. I dont even think the investors are getting served better as service involves cost and the regulations are making the earnings restricted and sadly the indian investors have still not realised the cost of advice which makes them reluctant to pay any charges. Things become more difficult with charging fees for regular investments like SIP's etc. The maximum mis-selling happens from the banks but i feel they are the least affected by the changes since they have the liberty to make clients sign the auto-debits and charge them the service fee. Secondly there is a lot of overlapping and redundancy with the qualification requirement. An MBA or a CA might be an expert in their own field but might not be aware about the Financial Markets to a great extent. Similarily courses like CFPCM, by FPSB should be recognised .

Very well summed up article.Great effort Mr.Vijay.Regulator should understand the ground reality. Welcome the proposal to abolish Upfront and stick to trail commission.When IRDA can do why not SEBI ??? Industry body AMFI should be proactive than just be reactive.

The article pretty much sums what we have been thinking too. Ultimately as many of the advisors will opt to be agents and the investors will be cheated out of the good advice they would have otherwise got and SEBI's purpose would be lost once again.

Extremely well articulated with right rationale and logic. Hope regulator understand the ground realities and do not kill the industry by impractical approach. If the industry is killed, then there would not be any investor left. So where is the question of investor protection?! Making the commission purely trail based for all channels and eliminating any kind of upfronting; would automatically prevent or reduce mis-selling. Banks, who in my opinion, are predominant mis-sellers; may not even sell mutual funds if there is no upfront incentive.

Kudos Vijay well researched and well written. Hope the regulators take these points seriously and it does not go the way the the Entry Load Ban concept paper went. Duality of an intermediary is natural and till such time the investors financial literacy level goes up such regulations may not work.