Assets managed by MF distributors to rise: Crisil-FIAI report

MUMBAI: Assets under management of mutual fund distributors could nearly triple from Rs 8 lakh crore (US$ 127 billion) to Rs 23 lakh crore (USD 368 billion) by 2020, a research report said today.

The increase would be led by gains in equity funds, as retail and high net-worth investors hop on to the economic growth bandwagon, a joint report by Crisil Research and Financial Intermediaries Association of India (FIAI) stated.

It would tantamount to a compound annual growth rate of over 20 per cent and mean that the financial distribution industry is at an inflection point. Such growth would also redirect some of the high level of personal savings to capital markets, the report stated.

The report estimated that life insurance distribution premium could also triple from Rs 3 lakh crore to nearly Rs 9 lakh crore while non-life distribution premium would increase from Rs 0.50 lakh crore to Rs 1.31 lakh crore.

"Indeed, rarely has there been a more opportune time for the distribution industry. Relentless focus on fiduciary duties to gain investor's trust, technology-enabled models for cost efficiency and training will help win the confidence of millions of investors in smaller towns and potentially change the game for the industry," Crisil Research business head Manish Jaiswal said in the report.

The number of distributors need to rise five fold, in order to achieve the objectives of higher capital market product penetration and financial inclusion, the report stated.

"Developing a vast pool of financial advisors and distributors is an imperative to realise the enormous potential. This also helps create employment and retail penetration, thereby helping the economy at large," FIAI director Vishal Kapoor said in the report.

"Since the industry requires specific skill sets, it is equally important to put in place initiatives that will foster such human resource development," he said in the report.

At present, an independent financial advisor needs to collect on average mutual fund (AUM) of Rs 2.5 crore to earn a revenue of Rs 20,000 per month. For a relationship manager, the AUM required to break even is nearly Rs 10 crore, the report stated.