AMCs offer unique incentives to distributors to push sales
April 22, 2010
It is now common knowledge that distributors and fund companies have found themselves in a state of disarray, post the entry load ban on mutual funds. With little or no revenues forthcoming through sales of mutual funds, distributors have lost the incentive to push these products. Faced with distributors’ apathy, fund companies are seeking innovative ways to incentivise distributors into selling their products.
DWS Investments, the mutual fund arm of Deutsche Asset Management, in a tie-up with NJ India, was running a unique offer earlier this month. In order to boost the systematic investment plan (SIP) applications, NJ-DWS were offering a free book ‘How Google Changed the World’ for every three SIPs logged by the distributor. This offer, which was only for NJ Fundz Network Partners, was applicable on a minimum application size of Rs1,000 per month (Rs12,000 per year). This offer is trivial compared to what some of the other fund companies are doing.
Religare, for instance, went all out to woo distributors to sell its product, Religare Monthly Income Plan (MIP) Plus. As an ‘early bird incentive’, Religare offered cash emoluments for certain number of applications received before 16th April. For three-nine applications received before that date, distributors were offered Rs75 per application. For applications numbering 10-14, distributors were entitled to Rs1,000; Rs2,000 for 15-19 applications; Rs4,000 for 20-49 applications and Rs10,000 for more than 50 applications.
The same product had another incentive structure in place depending on the volumes gathered by the distributor. For single applications up to Rs99,999, distributors were offered 0.75% as commission. For mobilising applications worth Rs1,00,000-Rs4,99,999, the commission offered was 1%. Distributors mobilising more than Rs5,00,000 for this product, up to Rs1 crore, were given 1.25% commission as incentive.
Moneylife has previously written (http://www.moneylife.in/article/8/3904.html) about how fund companies are in competition to organise junkets for distributors, hoping to enthuse them to sell their schemes. Unable to pay entry loads to distributors, asset management companies (AMCs) were spending money on flying distributors to exotic Indian and foreign locations.
While organising such extravaganzas for distributors is raising eyebrows, offering innovative incentives is an unavoidable and necessary outcome of the current regime. In the absence of such incentives, the mutual fund industry will virtually come to a standstill. — Sanket Dhanorkar