The introduction of no entry load on mutual funds seems to be haunting small-time financial advisors in a big way. Many complain that several clients have stopped systematic investment plans (SIPs) to avoid paying entry load on their investments. It is not known whether these clients have restarted the SIP with mutual funds directly, claim financial advisors. The market regulator Securities and Exchange Board of
''High networth individuals always had the option of paying no entry load and most of them have already started dealing directly with mutual funds. Now, even small investors are doing it to avoid entry load,'' says D Sundararajan, investment consultant, Trendy Investments, a wealth management firm.
''We haven't seen many clients stopping their SIPs to avoid entry load. However, there is some confusion as we are not sure about the commission rates of mutual funds, as there seems to be no consensus on the issue. Anyway, we are not affected much as we charge a fee for advice,'' says Gaurav Mashruwala, a CFP. However, he adds that many clients have called up inquiring what kind of fee or commission structure they would have to bear from now on.
Several small-time financial advisors - the kind you find in your neighbourhood - claim that if the confusion prevails, it will be tough for them to survive. However, many advisors say that they may be forced to switch to a more advisory mode of service if they want to stay afloat. '' Investment advisors can't be mere product-pushers . Most people have been selling products that used to fetch them the highest commission. They can't continue doing so anymore,'' says Sundararajan. However, this won't be an easy task for many because it may involve obtaining new skills which many old-timers would find difficult.
''The Sebi seems to have done everything at one go. They haven't really thought about the existing small time advisors or reskilling them,'' says a financial advisor, who doesn't want to be named.
Another problem many advisors face is stopping the existing SIPs of their clients and opening a new one to avoid the entry load, as it involves a lot of paperwork and man hours. ''There is a lot of paperwork involved and we are doing it almost free of charge, thinking that we may be able to generate some revenue somehow in the future,'' says a small-time advisor in the western suburb. However, some advisors claimed that they have already initiated the process of switching to the new SIP without closing the existing one. But this couldn't be confirmed independently.
Feeling Heat
Several small-time financial advisors claim that if the confusion over commission prevails, it will be tough for them to survive.
However, many advisors say that they may be forced to switch to a more advisory mode of service if they want to survive Market regulator Sebi seems to have done everything at one go. They haven't really thought about the existing small time advisors or reskilling them, creating lot of pain for them, says a financial advisor.
source: ET
MY COMMENTS –
It’s really strange that advisors are still thinking about advisory mode. I think from day one advisors are meant to render advice not just product selling. However, at times investors are least interested in advice. What they need is mere a form filling person? This as per my view is also responsibility of investors to think that are they being fair with their own wealth.
Opting for an advisor or a professional in any way is not wrong. It is in the favor of investors to think what to do with their money & also to whom they should trust. Trust the one who they think that would help them in long run rather than for one time only. One should understand that relationship is the key as an Advisor as well as an Investor. And any relationship is a two way process but in any way not a one sided affair.
