'Crorepati' MF distributors nearly double in 2014-15

Number rose to 87, from 45 in 2013-14 and seems set to keep growing

The number of individuals making over Rs 1 crore a year by selling mutual fund (MF) products saw exponential growth in 2014-15, with the robust flow into the Rs 12 lakh crore asset management sector, with 44 operating entities.

Statistics with the Association of Mutual Funds in India (Amfi) show such individual distributors almost doubled from 45 in 2013-14 to 87 in 2014-15. There were 22 in 2011-12 and 33 in 2012-13. Sector officials say this is a healthy sign, helping bring more people in the distribution business.

Aashish Sommaiyaa, managing director (MD) of Motilal Oswal Asset Management, says: “It’s a healthy trend and will keep increasing. This is an indication that those distributors who work consistently for 10-15 years in the retail business do well. They remain focused and have a long-term relationship with clients.”

During the year, the total commission payout to MF distributors surged to Rs 4,729 crore. This is more than four times the combined profit of the top four fund houses —HDFC MF, Reliance MF, ICICI Pru AMC and Birla Sun Life AMC. They earned a total of Rs 1,143 crore as profit after tax during 2014-15.

In 2013-14, commission payout to distributors was Rs 2,603 crore, and Rs 2,367 crore in 2012-13. It is set to increase in the coming years, if the strong flows in equity schemes is an indication.

According to sector experts, retention of clients during a tough market phase is key for distributors to grow. “When the markets improve after a long, dull phase, it helps investors and distributors,” they add.

Last year saw the stock markets gain nearly 25 per cent. Gross sales in the equity segment was Rs 1.5 lakh crore, highest in the sector's history. Equity schemes particularly offer better commissions, upfront and trail, to distributors.

Further, the year saw nearly 75 closed-end schemes in the equity category, offering three to eight per cent as upfront commission. Though not significant, this also played a reasonable part in pushing up distributor commissions.

However, independent experts say they find no reason to celebrate. Dhirendra Kumar, chief executive of fund tracking firm Value Research, says: “Doubling of multi-millionnaire individual distributors is not something to be excited about at a time when the investment value of equity assets have doubled. Rather, it is embarrassing to see such a low number of crorepati distributors in a country with a 1.3 billion population. The number of such individual distributors minting crores of rupees should have been at least in the thousands, given the fine and long track record of MFs as a financial product.”

Agrees Nimesh Shah, MD of ICICI Prudential AMC: “The challenge is the limited number of distributors. Despite being one of the best financial products, India has very few active distributors to cater to a billion-plus population.”

Nearly 100,000 MF distributors are registered with Amfi. However, barely a tenth or 10,000 are active. An active distributor is defined as one who brings at least one investment application a month. Against 10,000 active distributors, there are a little over 40 million investor accounts.

As on 30 June, the 44 player-fund-industry has an asset under management (AUM) of over Rs 12 lakh crore.
 

Year	No. of Crorepati Individual Distributors			Overall Commission Payout (Rs cr)
2011-12	22			1,884
2012-13	33			2,367
2013-14	45			2,603
2014-15	87			4,729

Source : Association of Mutual Funds in India (Amfi)