Radhika Gupta, the CEO of Edelweiss Asset Management, has explained the role of a mutual fund intermediary in an interview with Economic Times.
A mutual fund intermediary, also known as a distributor, is an individual or firm that connects investors with mutual fund companies. The intermediary helps investors understand the different types of mutual funds available, and recommends funds that suit the investors' investment objectives and risk appetite.
According to Gupta, the role of a mutual fund intermediary is crucial in the Indian context, as the majority of investors in India are first-time investors who require guidance on mutual funds. Intermediaries also help investors with the account opening process, facilitate transactions, and provide assistance with paperwork.
Intermediaries earn a commission from mutual fund companies for the services they provide, but the amount of commission varies depending on the type of fund and the investment amount. In recent years, regulators have introduced new regulations to improve transparency and reduce mis-selling in the mutual fund industry.
Gupta emphasized that it is important for investors to choose an intermediary who is knowledgeable and trustworthy, and who is focused on providing long-term value to the investor. Investors should also be aware of the fees and charges associated with mutual funds, and should read the offer document carefully before investing.
Now, let us understand the penetration. A lot needs to be done over here, but since we are talking about the change in time, how has this role of a mutual fund distributor led to deeper penetration of mutual funds in India, especially in tier II and tier III where we are seeing a rise of awareness and also participation. How has the narrative changed over the years?
One is that, over the last few years mutual funds as a part of household savings has risen. In the last four-fiSo, our industry has expanded and the expansion is coming from equity, from individuals. The backdrop is extremely important to understand. The SIP book of the industry is now Rs 13,000 crore and this is slated to expand further because India's investing population and young population is just getting larger and larger. What role does an intermediary play? If you look at the breakup of the money invested in mutual funds, at least by individual investors, 80% of that comes through intermediaries. ..We have to realise that whether it is a mutual fund distributor or an RIA, these people are entrepreneurs and they are building businesses and all they have really going for them is the client. They do not have a large brand name going for them. They really have interest in keeping the client above and all. And, in my experience in this industry, a large part intermediaries do a very good job understanding clients, selling them the right funds because honestly if they do not, they would not reta ..
Do you think AMCs will get into the mutual fund distribution business in future?
AMC is a standalone business and Chinese Walls are extremely important in our regulated structure. AMCs will have investors who come to them directly, whether through their website or through fintech platforms. So, to that extent, that exists. But even today, 80% of the investment that happens by individuals happens through regular plans and through intermediation. So, while direct continues to b ..
