I am surely among the top 5 people in the country in terms of the number of investors met and Mutual fund distributors met over the past 18 years. No this is not an idle boast, just a statement of fact.

I realize the amazing amount of work done by the distributors – including the bank relationship managers, the national level distributors, the online platforms. It is an amazing tribute to them that the industry has made such deep inroads. Whether it is Guwahati, Srinagar, Trichy, or Kovai, Rajkot, Muzaffarpur, Patiala – we see a class of almost 100 distributors eager to learn and earn a decent living.

We have about 68000 distributors out of which about 11000 pay Income tax. So I am making a safe assumption that 57000 of them earn less than Rs. 3L in aggregate. Another worrying feature is that the average age of the distributor is very high. This means younger people – say 22 years of age – are not being seen. The children of the distributors are not keen to enter the industry, or I am not able to see them. This is scary.

Excessive regulation (not clear about what it will achieve) will mean that the small distributor will vanish, and the industry will not be able to reach the small investor. A small investor SHOULD not go direct without understanding the risk of investing. I would think that in case of focused funds, sectoral funds, long gilt funds – the minimum size should be increased to Rs. 500,000 for direct applications.

I spoke to a few ‘direct’ investors. The way they are buying /choosing funds is DANGEROUS. It will hurt them and hurt the industry very very badly. To think ‘Subra’ can do direct, so his maid, cook and driver can do direct investing is good democracy, but I am sure it will hurt the investor in the long run.

Let us examine the role of an intermediary – he is the market information provider – apart from the person filling up the form and sending it to the amc. So if a company is defaulting in its fixed deposits it is the ‘agent’ who informs the investor, the press has a limited role. The role played by the press in ‘educating’ and ‘marketing’ is good, but one has to have a certain base knowledge before one can consume information and data from the media. For example if you do not know how the ‘rating’ mechanism works and how it should be used, you will tend to use it wrongly.

The people advising the regulator are eminent people, but they may not be able to spot Muzaffarpur on the Bihar map. And the small distributor lives there. He will just migrate to a different product. I have written about the ‘tarawaniwala’ or the guy going into the ‘stock exchange ring’ – they were about 3000 of them. When share trading went electronic this guy was eliminated. No tears were shed for him. Sure the distributor will find something else to do – from becoming a loan aggregator to selling something else but to get these people out of this profession is nothing less than suicidal. If the regulator and his esteemed advisers cannot find a model which will work, they should not disturb the existing system. Already there is an alphabetic soup of designation among advisers, distributors, financial planners, consultants, agents, …and what have you.

When I speak to the investors in the small town, they just call them ‘agents’.

I visited a senior citizen home and found the kind of services that this ‘agent’ renders for the senior citizens – right from paying their bills, withdrawing money from the bank, occassionaly even buying medicines – such services cannot be ‘billed’. Nor can such trust be built.

See how the regulator has s…d the industry in UK. It is not very inspiring. You have to let the market evolve.

Oh Mr. Regulator, I can assure you after all this that you do, the ‘agent’ will still find something to do. It is the small and medium fund houses who will suffer in the medium term, the industry in the slightly long term and the country in the long term.

No, I am not asking for an audience – I have not visited the regulator for almost a decade – but get your esteemed eminent people to back pack in rural India. Its time some of you went beyond the top 10 IFA and thought that they are all billionaires. Yes Citibank, Hdfc bank and the likes earn 99% of the commission. I am taking about the 99% of the distributors trying earn the 1% that the biggies do not want to earn.