IFA Galaxy recently conducted a very successful 3rd annual summit in Chennai. Ramesh Bhat takes us through the key take-aways from the summit, his thoughts on key issues that he would like AMFI and AMCs to focus on and also shares a progress update on the ambitious plan to stitch together a South India IFA Federation, which will represent state level IFA associations from all 5 southern states.

WF: Hearty congratulations on a successful annual summit. In your opinion what were some of the key take-aways from this successful conference?

Ramesh Bhat: 392 people attended the summit from all across the country, especially from all parts of South India. The program was also broadcast live on various media so there were many IFAs watching from other parts of the country. The main highlights were sessions from Uma Shashikant and Brijesh Dalmia from Kolkata, Mr. Harish Rao from Money Management and Mr. Udayan Roy, editor of Outlook Money. The sessions were very interactive as people in the sessions as well as the remote audience were asking relevant questions. The topics covered included -

• Expectations of clients from advisors

• How to build a sustainable business model by an IFA

• Do's and don'ts by an IFA and

• Asset allocation with emphasis on debt funds.

Overall people appreciated all the sessions.

WF: There have been a slew of reforms in the Mutual funds sector. Apart from the direct plan proposal - which is causing distributors a lot of anxieties, which of the reforms announcements give the biggest opportunity to IFAs to really focus on their business growth in the next five years?

Ramesh Bhat: The SEBI circular dated 19th August 2012 regarding higher expense ratios is good for IFAs in tier II and tier III cities as it gives an opportunity to expand the business and earn more. The IFAs in the top 15 cities should expand to tier II and tier III cities. I myself will be keen to explore opportunities in smaller cities outside of Chennai. We found that most of the advisors from tier II and tier III cities are pleased with this announcement. This will help them to get some additional revenue for sustaining their business which is very important. This is a very good move from SEBI. IFA Galaxy would like to thank the finance ministry for taking it up with SEBI and bringing in lot of changes and reforms to the mutual fund industry.

WF: On the issue of the Direct Plan which has got lot of distributors anxious, in your view, is there a possible alternative solution that can be put forth to SEBI which can still meet some of the principles that they want to abide by, but which is little more inclusive rather than the current proposed regulation?

Ramesh Bhat: The abolishing of the entry load has reduced the IFA's income by about 75%. The direct plan will be another big blow for distributors. We have circulated a memorandum and initiated a signature campaign among the IFA community members on the impact of the direct plan.

Investors in mutual funds are generally people who are not savvy enough to invest in direct equity and therefore we do not see the value of the direct plan. If people invest in mutual funds through the direct plan and make losses, it is not clear who will be held responsible for the losses.

First we need to educate the investors. We can start with IFAs going to schools and colleges to spread awareness about mutual fund investments and these IFAs can get CPE points for such activities. At that time of renewal of his ARN he need not pay around Rs. 3500 rupees every time. In this way, the advisor saves money and also educates the investors and in turn he gets knowledge because he is interacting with lot of investors and understands their point of view and can be more prepared in the future to help the investors.

Investor awareness is very important and they need to know about a lot of small but important things like change of address, change of bank mandate, consolidation of folio, transmission of funds, inclusion of nominee, handling of minor converting into major, and death claims. Knowledge regarding these things will be lost in case of direct plan model as there is no point of contact to manage these things.

WF: What are some of the key points that you would like AMFI and AMCs to speedily implement to ease operational bottlenecks and make the whole investing experience more convenient both for an investor and a distributor?

Ramesh Bhat: The most important thing is the CPE points. Currently IFAs have to pay about Rs. 3400 for renewal along with attending classes for two days and renewal fees as well. This has to be done once in 3 years. Instead, if they take the MFD certification, it can be done within Rs. 1000 and just a couple of hours of an examination. The ARN renewal process needs to be re-examined. IFAs can also get CPE points for attending knowledge seminars across the country.

The other aspect we would like to place before AMFI and all AMCs is to have a broader consultative approach with all large IFA associations pan - India, on any new developments and proposed changes. This consultative platform will also help address distributor issues and concerns.

WF: How is the South India IFA Federation taking shape now?

Ramesh Bhat: The South India Federation is shaping up well. All the presidents and secretaries of all associations of South India attended the IFA Galaxy knowledge summit. We are working on the rules and regulations and will update everyone once they are set up. All 5 state associations are working in a collaborative manner - Karnataka, Tamil Nadu, Kerala, Andhra Pradesh and Pondicherry. Rather than seeking membership fees for the association, we are proposing that the annual expenses of the federation would be divided between all 5 state associations in a proportionate manner. We hope to be sharing with you some good news of the developments in the Federation very soon.