Prajna Capital - An Investment Guide

AN investor-friendly measure adopted by Association of Mutual Funds of India ( AMFI ) has put distributors in a spot. As prescribed in Amfi’s best practices, the repealment of no-objection certificate (NOC) for shifting to a new financial planner (a mutual fund distributor or agent, in this case) has left a hole in the earnings kitty of large distributors. Amfi had amended the clause regarding the no-objection certificate in a bid to empower investors over unscrupulous distributors. Freedom for investors to choose their distributor will, over the long run, promote healthy competition as distributors are forced to raise their service standards to retain customers. However, the new rule is also being used as a weapon to poach businesses of other distributors by hiring well-networked relationship managers working with established product distributors. The modus operandi is simple. Fund distribution, as a business, is predominantly dependent on relationship managers, who push fund pr...