I was talking to the CXO of a mutual fund and he was telling me that it is performance of a fund scheme which should matter and not the size of the fund. Nice spin.

So I turned him to another topic…and then another.

Then I came to him about measuring IFA performance. He was then singing praises about some of the big IFA – it was some kind of a prayer book. Then I asked him how much share he has of the IFA’s book size. No, he admitted it was not much. I asked him about the PMS portfolio of the IFA, again he had no idea.

I asked him about the criteria that the fund house used to judge IFA. He said size.

Hmm..life comes a full circle. Why are IFA not judged on:

• number of sip started
• number of kyc done – means new investors brought into the MF fold
• stickiness of aum
• training attended
• continuing professional exams – to be conducted by the amc?
• by asking for customer feedback?
• by level of education?
• by the mean, median, mode of the clientele aum?
• by zero redemption in the load period?
• by designing questionnaire for clients to know whether they are doing goal based investing?

It is surprising that even the marketing teams of mutual funds do not interact with the IFA. I have never ever seen the marketing team of an AMC asking the IFA what they want in a marketing campaign!

The IFA also realizes that the amc does not like them. They do not like the financial independence of an IFA – unlike the employee. The IFA is jealous of the employee – who gets a guaranteed salary. Funny relationship indeed.

Interacting with the IFA seeing what the can do, what potential he has, how it can be nurtured is NOTHING that the fund houses do. No not even those who are 44, 46 and 531.

Well, all that requires effort. When you meet the people in Amc you do not get a feeling that they want to do all that. Right now, they are all happy looking at the cash flow that is coming in every day. They feel if they take their eye off the bank account the money will not get credited. ‘

They ask the IFA the following questions:

• how much do you give in other fund houses?
• why do you not give something to us?
• how much do they give?
• if we give you 10 paisa more how much will you give us?
• ok sorry at your level 15 paisa extra and how much will you give us?

If an amc were to get a Rs. 50L cheque in an equity fund, a Rs. 5 crore cheque in a bond fund and Rs. 50 crores in a liquid fund – the rush will be towards the Rs. 50 crore cheque. Simple, it improves their rank from 545th fund house to 544th. It does matter I guess.

Size does matter I guess. I do not blame investors or Ifa who gravitate towards bigger fund houses. At least it is established that they have gamed the system and are here to stay. They may treat the IFA like a dog, and the bone may not be juicy, but it will be there for another 20 years – hopefully?