Independent Financial Advisors (IFAs), who have been grappling with regulatory changes over the last two years, are still betting more on mutual funds than other financial products. The income, however, has taken a beating, with nearly two-thirds of industry players reporting fall in revenue.
According to a survey by Cafemutual, business economics have changed, as commissions have gone down and the bleak market outlook has made 72 per cent of IFAs report a decrease in income from the past. Most IFAs focus on selling equity funds and there has been only a marginal shift to non-equity categories.
The survey, done in August-September, further reveals that even two years after a ban on entry loads, most IFAs that sell multiple financial services products are earning the most from mutual funds. The southern region has been an exception to this trend.
IFAs, however, have reported wide fluctuations in income and expect the mutual fund industry and the regulator to move to a more client-centric model, where they are able to charge their clients, shows the survey that covered more than 1,500 advisors.
Interestingly, the IFA business is still attracting newcomers and five per cent of the IFAs surveyed have joined the business in the last two years. Most IFAs are of the view that the regulator is not concerned about their views and voices.
"In the past, inflows would dry up completely during market downturns, while today we have an estimated eight million systematic investment plans running, most of those being brought in by IFAs," said Prem Khatri, founder & CEO, Cafemutual.com.
"Maintaining income level is the key concern of IFAs at this point and this can be done if they build their marketing capability. The onus is on IFAs to adapt and progress under the changed circumstances," he added.