Can FIFA become a single voice for all IFAs?

Vijay Venkatram, Director, Wealth Forum, 21st April 2012

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Some of Mumbai's leading IFAs have come together to promote FIFA - Foundation of Independent Financial Advisors as an umbrella entity that can represent the interests of the IFA community with regulators and manufacturers. FIFA would also like to work towards professional development of IFAs and help improve the perception of the IFA community in the eyes of investors and regulators. We spoke with Dhruv Mehta, Chairman of FIFA to get a good perspective on this noble initiative. We also spoke with some IFAs from other cities who have become FIFA members as well as representatives of leading IFA associations to understand their views on joining this movement. The key issue that emerged out of these discussions is whether membership should be in an IFA's individual capacity or whether your existing local IFA association should join as a member, representing the interests of its members in a true federal structure. Read on to understand more about FIFA and what various stakeholders think about its road ahead.

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WF: What was the idea behind setting up FIFA?

Dhruv Mehta: The genesis of FIFA took place 2-3 years back. As IFA's, individuals usually got a chance to interact with their peers only when a mutual fund or a manufacturer would organize an event with a view to either promote a product or to have a session on the markets. That's the time when a lot of learning and sharing took place. This learning and exchange led some of us to think that it would be a good idea if IFA's could come together on a common platform and share their views and thoughts amongst their respective peers. We found that as an individual, generally one may not be having the adequate knowledge and the expertise in all the areas and aspects of the marketplace. So the broad thought was the need felt for common sharing and learning because as individuals, we were not able to carry it much forward.

Subsequent to information becoming more accessible with the use of internet, the markets changed visibly over the last 2-3 years. The 2008 crisis and a horde of regulatory changes thereafter started impacting the business models and we felt the pinch that as IFA's, we did not have a voice to make a case on the problems and the ground realities that we had to confront when the regulations were changed. In different forums, the regulator as well as the AMFI suggested that IFA's across the country need to come together and voice their common view points which could be considered while the manufacturers or the regulator is trying to bring in better practices or changes. That was the final straw. So FIFA was set up with the views of sharing the knowledge and to harmonize and bring across common views from different IFA's across the country to be able to engage proactively with the other stake holders which would ultimately lead to the development of the whole industry.

WF: What is the current status of FIFA ?

Dhruv Mehta: The current state is that we just got Foundation of Independent Financial Advisors incorporated on 15th of February as a company under section 25 of The Companies Act. Section 25 companies are non-profit organizations where a special license is issued and subsequently the company is incorporated. While we were contemplating its incorporation, being individuals we were looking at various alternatives as to whether it should be incorporated as an Association of persons or as a society or as a trust. We sought help of some of the Chartered Accountant IFA's and came to a consensus that from a long term perspective, it would be better if we have FIFA registered in the company format. In the last one year, we have been consistently in touch with quite a few IFA's across the country and we have got a good response from Delhi, Kolkata, Chennai, Bangalore, Pune and so right now, we are in the process of enrolling members. Over the next 2-3 months, we will try and get IFA's across the India enrolled.

So far, we have 26 members who have actually been enrolled. But over the last one year, we have been in touch with more than 100 IFA's across the country who have shown eagerness in becoming members. With the applications that we have sent across now, we are adding 2-3 members every day.

WF: What is the membership fee that an IFA is supposed to pay?

Dhruv Mehta: Membership fee which is based on the three categories of membership that we have. There is a founder member category which is open only for three months from the date of incorporation i.e. it will be open till 15th of May. And then we have a life member category and an ordinary member category.

For Founder membership, there is a Rs. 1 lakh admission fee and a 100 rupees annual fee. For a Life member, there is a Rs. 50,000 admission fee and a 500 rupees annual fee and for the ordinary member, Rs. 2500 is the admission fee and 1500 the annual fee.

WF: And what are the benefits at these different membership levels?

Dhruv Mehta: There is no difference in terms of rights and benefits between a founder member and a life member. The founder and life members differ from the ordinary members (besides the fee structure) in terms of the rights for election of the board. 60% of the board of directors would be elected by the founder and the life members.

WF: And the balance 40% will be elected by the ordinary members?

Dhruv Mehta: Yes.

WF: How many board members would you look at?

Dhruv Mehta: Currently we visualize a maximum of eleven board members and right now, we have eight board members to basically sign the memorandum and the articles of association.

WF: Who are these initial eight members? Yourself of course…

Dhruv Mehta: We have Mazhar from Abacus Investments, Lalit Gianchandani from Edge, Ganesh Shanbhag, Roopa Venkatakrishnan, Sangita Javeri from Prescient, Yogesh Sharma from YS Capital and Asit Bhansali - all leading Mumbai based IFAs

WF: What are the immediate priorities? As I understand of course the first priority is to attract members from across the country.

Dhruv Mehta: Yes, the enrolment is the immediate priority. Also, currently all the eight board members are from Mumbai, so we want to expand the board so as to include members from outside of Mumbai. Another priority is to create a sort of a management committee which would have people who want to actively participate in running the organization. Eleven members on the board will not be able to give everybody an adequate representation and that's why we look at creating a committee which would ensure greater participation from all over the country. We also have a provision in the organization to admit another association as a member. This provision was a consequence of the feedback from the discussions with KAMFA in Bangalore and IFA Galaxy in Chennai. So we will also be looking at some of the other associations which are already in place to become a part of FIFA which would ensure that a common view can be put across to other stake holders.

WF: If there is an association from a particular city which wants to become a member, then it becomes a life member with the same life member fees of Rs. 50000?

Dhruv Mehta: For an association, the membership fee is Rs.25000 and an annual fee of 100 rupees per member.

WF: Does that mean that associations will come in only as ordinary members, they cannot come in as a life member?

Dhruv Mehta: Yes. Presently, that's how it is structured. But I believe the fee structure would evolve when we will interact with wider audience and when we have more members on board. Subsequent to the incorporation, we had discussions with some of the IFA's and they had a lot of suggestions on the fee structure. So, we can always rework the structure when we get feedback from more members and associations.

WF: Apart from getting the critical mass from various cities, what would be the first steps that FIFA would look at taking up? Would it be regular meetings of IFA's or are you looking at a web presence? How will you actually be disseminating and sharing information amongst yourselves?

Dhruv Mehta: We are already in the process of developing a website (www.fifaindia.org). One way of dissemination of information is through engaging with people like you (Wealth Forum) and the media. So, we wouldn't want to necessarily duplicate that information. But we will of course fill the gaps wherever necessary. Another way of disseminating information would be by way of organizing events on subjects which could be of interest to the members and also work on some papers or materials which could be of use for engaging the regulators and the manufacturers in terms of generating better practices.

WF: Wealth Forum will be very happy to support IFAs in their knowledge and insights sharing initiatives, in any manner that we can. How you would like FIFA to develop - what will be your medium term vision that you would like to share with fellow advisors?

Dhruv Mehta: In the near term, we would like to have members from say, top 20 cities which would account for most of the IFA community. And then moving over to the medium term, we would like to expand the membership base to 150-200 odd cities which would represent the large chunk of business of mutual funds and financial savings. So one goal is to get a countrywide enrolment and the whole business will develop only if there are increased financial savings across the breadth of the country.

One of our visions is to disseminate the benefits of this industry and the benefits of the financial savings and spread that message through our association. We also look forward to build a sort of a charter something like a code of ethics for IFA's and also we look to collaborating with NISM to get a sort of accreditation for the members. Our vision is that a member of FIFA be looked upon as a person that the investor would want to entrust with his money.


Wealth Forum spoke with some key advisors from outside Mumbai to get their views on this initiative and what they would like to see in FIFA.

Ashish Chadha of Chadha Investments, Delhi - one of the first non-Mumbai IFAs to become a member of FIFA, has this to say : " I hope FIFA will become over time something like MDRT - a knowledge sharing platform of successful advisors. I think IFAs need to lobby with regulators on a number of issues and I hope FIFA will become an effective lobby for us. I always relish interacting with advisors smarter than me, and hope FIFA will offer me such opportunities - which currently only the Wealth Forum Platinum Circle does annually. What I don't want FIFA to degenerate into is a politicking platform where we try to score brownie points against other distribution channels like banks, NDs etc. by lobbying with manufacturers about them. I would like to see FIFA playing a constructive and inclusive role in developing our business."

Brijesh Dalmia of Dalmia Advisory, Kolkata - one of FIFA's founder members and among Kolkata's leading IFAs, says, "What excites me most about FIFA is the potential it has to become a truly national body, comprising the top advisors from across India. I have so far not joined any other association, as most regional associations do not have representation from leading advisors and don't inspire confidence in growing in stature to become a truly national body. For me, the biggest priority for FIFA is to have meaningful dialogue with regulators, manufacturers and manufacturer associations. This dialogue can have weight and will be taken seriously if FIFA represents all the top advisors from across India."

Bharat Bhushan of Money Options, Delhi - a key member of DFDA - speaking in his individual capacity said "FIFA is a well-timed initiative. To make it more inclusive and geographically well represented, it should bring in electronic voting on key issues and regular meetings in different parts of the country. A key challenge for FIFA is how it will provide a common voice for different business models. I for example have always stated that I do not subscribe to the acronym of IFA - I am neither independent, nor am I an advisor - I am a distributor and I wish to remain this way. Views of entrepreneurs like me may be different from advisory oriented people. FIFA will need to find a way to be truly representative of diverse business models."

Kanak Jain of Suskan Consultants, Kolkata and Secretary of ASK Circle - a leading East based IFA association, said "FIFA should preserve a true federation structure and enroll only IFA associations from across the country. If FIFA enrolls individual members as well as associations, it will create confusion and can dilute the role of associations."

Echoing similar sentiments, Ramesh Bhat of Aniram, Chennai and President of IFA Galaxy - a leading South based IFA association said, " Firstly, I want to congratulate Dhruv, Roopa and the FIFA team for the laudable work they have started. IFA Galaxy has had a detailed meeting with them and are keen to support FIFA, but under the condition that FIFA enrolls only associations and not individual IFAs. The point here is that today, there are several local level IFA associations in several states that are doing a good job of taking up local level issues of small IFAs and helping to resolve them. If every small IFA becomes a member of one central body and starts approaching it for all local issues, the central body will not be able to cope and respond. You will lose the benefit of all the efforts that so many local level IFA associations have put into getting IFAs onto their own local platforms. In order to promote a more inclusive approach, FIFA must look at a federal structure where only associations become members and not individual IFAs. FIFA is in a good position to help the IFA fraternity - the promoters are based in Mumbai - and therefore can have much better access to regulators than we can, as we cannot realistically keep travelling to Mumbai often for regular interactions. We support the idea of FIFA, we only want the membership process to take care of all local level associations appropriately."

Reacting to the views on enrolling existing IFA associations as members, Roopa Venkatakrishnan,one of Mumbai's top IFAs and a director on FIFA's board said, "We will be very happy to welcome all IFA associations from all over India as members of FIFA. This will enable the movement to become truly inclusive and pan-India in stature. The issue we need to tackle is about enrolling associations that are not created as legal entities. As per FIFA's constitution, any individual IFA or a legally constituted IFA association can become a member. How do we enrol associations that are neither a society, nor a trust, nor a Sec 25 company or any other such legally constituted body? In such cases, it is advisable for members of such associations to become FIFA members in their individual capacity."