Crorepati MF distributors up two fold in FY17, as AUM triples in 5 years

Commission paid at a record Rs 4,987 cr, up 36%; equity schemes cross Rs 70,000 cr in sales

Individual mutual fund (MF) distributors earning more than Rs 1 crore in commissions rose 83 per cent to 110 in 2016-17, from 60 a year before. In 2011-12, only 22 individuals earned more than Rs 1 crore in commissions.

The increase in wealthy distributors comes on the back of a three-fold increase in the sector's assets under management (AUM), from Rs 6.6 lakh crore to Rs 18.6 lakh crore during the past five years.

Overall commission paid to distributors during 2016-17 hit a record high at Rs 4,987 crore, up 36 per cent over the previous year.

Continuous and robust inflow into mutual funds -- equity schemes in particular -- is one reason for the larger commissions. Equity schemes saw net sales of units worth a little more than Rs 70,000 crore in FY17.

The rising popularity of systematic investment plans (SIPs) also saw distributors make decent upfront commission while getting new clients on board. An appreciation of investment value also boosted their earnings, as commission payout is calculated on the current value of existing investments.

The Association of Mutual Funds in India (Amfi), under its 'best practices' guidelines, had capped the upfront payment at not more than one percentage point for 36 months in the case of an SIP investment. Several fund houses follow a trail-based model for commission payout to distributors; others continue to follow a mix of upfront and trail payouts.

Dhruv Mehta, chairman of the Foundation of Independent Financial Advisors, had said at a recent Amfi meet that these people are important in the MF sector, with several investors needing hand-holding. Without IFAs, he said, penetration of MFs at the mass level might not be possible.
 

According to Sundeep Sikka, chief executive, Reliance Nippon MF: "IFAs are the foot soldiers; their contribution to the growth of the industry can't be undermined. It is a noble profession and I expect more people will join. We have just scratched the surface; the potential is huge. To cater to that potential, the industry will require a lot more distributors than what we have today."
 

Over recent years, there have been several guidelines from Amfi and the markets regulator of a restrictive nature for distributors. Despite this, the number of the latter registered with Amfi has continued to grow, from a low of 48,000 in 2011-12 to 86,000 in 2016-17.