The Mutual funds have reached about 10% of the PAN holders in India. There is a belief that this number will increase, and I am sure that it will. The question is who will do the last mile delivery.

I strongly believe that even with mis-selling it is the bank branch and its employees who are going to do this. I have Amc telling me that bank RM happily remove money from RETIREMENT PLANS and CHILD PLANS. Obviously they sell ONLY if these do not have exit barriers. Exit loads do not bother them – it is the client who bears it.

Banks have mis-sold Hybrid funds. The tragedy in these funds is that when you get a dividend (out of your own capital) you still pay income tax ON YOUR OWN CONTRIBUTION.

The small mutual fund agent (aka distributor) has lost out on “upfront commission” and so he/she shifted to PMS. Now the PMS has a direct option too. Great…but yes it is going to hurt the small INVESTOR and the small AGENT.

The small guy will go to the platforms – like FundsIndia, …there are others but I am unable to remember the names. Or he will consolidate – like Sapient – or its equivalent. There is a limit to how many senior people Sapient wants so deal with. So there would be more people starting this consolidation – and their agenda could be to reach say Rs. 500 crores and then go to giants like Sapient and offer their aum for consolidation. With NJ and Zerodha going for amc licenses it is the large cap funds and ETF which will suffer. Bansal (flipkart) will not come to run an ETF and Index fund portfolio. With NPS, and VPF also chasing the index – it will become ‘unsexy’ to run commodity funds. In fact well managed close ended funds will become far more profitable – for the client and the fund manager.

I do think there will be a lot of Investment clubs – like Tamilnadu investor Association – which will encourage people to own equity shares directly. I would call them “directed investors”, Do it yourself investors, Robo advisory based investors, …and it will not just be one category of investors. Those of us who swear by Dalbar studies need to understand that the Dalbar studies were sponsored by….? well by an adviser’s association. Not exactly an independent study. So the “adviser alpha” is not easy to achieve – and is far more difficult to communicate. I know Swarup Mohanty is trying hard, all the best to him.

Another issue that older IFA have is not knowing what to do with their practice (or business) after they retire. Brings us to 2 questions – should they retire at all and if they do retire at what age. All these questions will again push the older, higher aum IFA to consolidate with like minded people. There may not be enough space in Sapient for all IFA, but there is surely space for 100 Sapients to consolidate and grow the business. There could be groups concentrating on say “Retirement” or “Goal based investing” – and they could seek help from an RIA on a consolidated basis. Phew! So many options.

I do think the regulator also wants to regulate a Sapient with Rs 10,000 crores or a Funds India with Rs. 2000 crores rather than a Xyz with 90 crores. It is very difficult to monitor a single individual who could resurrect with his wife’s ARN or his son’s ARN in a different avatar.

Interesting space this. Keep watching. None of us know what will happen next. None. Not even Rajdeep Sardesai or P Chidambaram or Ramchandra Guha or Prashant Bhushan. Not even Amit Shah or Narendra Modi.