‘No need to bring back mutual fund entry load in same form’

In the last few weeks,several discussions have taken place in the Finance Ministry over MFs with the various stakeholders. The challenge is how to balance commercial viability of distributors with investor’s interest. Now MF agents do not want to service the small investors because of low incentive. However,there is no need to bring the entry-load back. We should move to variable cost model where the fee can be negotiated with the advisor depending on the quality of the advice provided.

There is no strict regulation over the advisory business. The mandatory certifications are product based and not advisory based. Should the focus not be on improving the standard of advisors?

Yes,I think the focus is misplaced. There is a need for setting professional standards for the advisors in the industry. Product certification is not enough. There is no thinking around bridging this gap in the industry. Most investors do not have access to good quality advisors. Most advisors do not fully understand all the products they are selling. It is easy to clear the certification exam for becoming a broker or a MF/ insurance agent.

Moreover,there is no regulatory supervision over the quality of advisors. It leads to mistrust whenever an investor loses money because of incorrect advice.

The slowdown has been longer than expected. How has it impacted the wealth management business?

The business is actually in a recovery phase now. Both,the investors as well as the advisors have adjusted to the new reality. Dependence on equity has drastically come down. Capital protection funds,short-term debt funds,gold ETFs,and FDs have emerged as major investment options in the last 3-4 years. Post financial crisis,the investors’ interest has moved to preserving capital.

Given poor returns from SIPs of MFs,are equity investors moving towards real estate and gold?

People have made easy money through real estate. The queries from the investors over real estate have definitely gone up in the recent years. But there is certain cautiousness now. Gold will remain attractive till rupee does not appreciate.

It has emerged as a good hedge against rupee depreciation.

For investors to make money through SIPs in equity funds,it has to complete a full cycle. Since 2008,there has not been a sustained rally in the markets. Equity is such an asset class that even a two to three months’ sustained rally will compensate for the last five years of losses.

Those investors that are able to keep patience and ride this period will surely make money in the long term.