Indian financial regulators have altered the landscape of investments. They have also brought a modification in the advisory and management fee structure of financial products. This article is concerned with the Mutual Funds and the AMC section of the BFSI industry. Regulators have been successful in bringing down expense ratios. They have also brought transparency in the system of product pricing and classification. All these have opened up new avenues for growth.
The transparency in the system has been introduced according to the global norms and regulations. In the last ten years, the regulators have brought a revolution of change in the entire industry. Their AMCs and model of business are similar to those of the developing countries.
Indian economy is in dire need of alterations in the rules and regulations of the financial industry. India is different from other developing countries. The difference lies in the current median working population, which ranges from 28 to 31. Since the year 2005, the Indian rural population has witnessed a decline too. The rural population has reduced from 59% to 51%. All these have led to a demand for reformation in the financial industry shortly.
India is slowly traversing towards a developed economy. Hence there needs to be transparency in the pricing of financial products. It should be under control so that clients can reap maximum benefits. Certain sells based advice models have led to miss-selling. Any person who belongs to the BFSI industry cannot simply turn a deaf ear to this issue. Regulators have worked hard and come up with solutions for this problem too. As a part of these changes, specific collateral Impacts have taken place. But for the sake of the growth of the BFSI industry, these compromises and sacrifices had to be made.
The simplicity of product identification, mapping and classification as per the benchmarks, advisory and sales-related rules and regulations, as well as the significant Promotion of Direct Schemes, have brought modifications in the AMC and Mutual Funds industry. The long term industry of Mutual Funds has benefitted from the transformation of performance-based sales.
Brokerage rates or commission has played a crucial role in the selling of products in the last ten years. Only a very limited number of people preferred to sell products based on performance or advisory.
If we talk of opportunities in the coming ten years, India will witness more and more foreign AMCs opening their shops in India. Indian industry is no less than the international ones. Because of this modifi8cation, overseas companies will be attracted to the Indian market. Foreign AMCs will collaborate as well as sell products to the investors of India.
Indian investors too will prefer to invest in the global AMCs and Mutual Funds. There will be relaxation in the cross border investment policies. New avenues will open up. Earlier, the situation was different. The game was in the hands of agents and commissions. But now things are different, and a new industry is developing gradually.
The BFSI space will witness new investments. The network of IFA will be capable of selling these products to the clients shortly.
Online business has brought a revolution of change in the business scenario of India. With industry transformation, this change will keep on impacting the Indian market. Index funds, as well as ETF, will soon become a part of the Mutual Fund industry of India.
The overseas AMCs will return to India to reap the benefits of the growing middle-class population here. The main target of these AMCs will be millennial investors. Millennials are expected to bring forth more changes in the industry.
AMCs will prefer to invest in India because of the millennial workforce.
IFA community should be prepared to take advantage of these opportunities. As more and more international services will be on the offering, advisory services will experience radical changes. There will be some challenges, too, no doubt. But identifying the opportunities, facing the challenges and capitalizing the opportunities at the same time is the need of the hour.