Funds lead India financial advisors' sales - survey

MUMBAI, Sept 10 (Reuters) - Financial advisors in India generate a majority of their sales by selling mutual funds and acquire more than six of every 10 clients through referrals, a survey by research firm IIMS Dataworks showed on Wednesday.

Those offering mutual funds as well as insurance products generate 55.2 percent of their turnover selling funds as customers prefer them for their more attractive returns and relatively better liquidity, it showed.

Popularity of unit-linked insurance plans, which combine insurance with equity investments and offer hefty fees to agents selling them, has risen over the last five years helped by a stock market boom.

Nearly a third of the survey participants, however, said selling mutual funds was easier as they levied lower fees.

But their customer base, estimated to be only 5.3 million in 2007, remains low and was expected to have contracted in 2008 given adverse market conditions, IIMS Dataworks said.

Indian shares have plunged nearly 28 percent this year, hurting demand for equity mutual funds which received only 27.62 billion rupees in July, their lowest monthly inflow in two years, data from the Association of Mutual Funds in India (AMFI) showed.

Mutual fund reforms such as scrapping of entry load on direct applications received by asset managers and more stringent rules to verify the antecedents of investors were also affecting sales.

Nearly six of every 10 respondents said the new norms were hurting volumes but a third showed willingness to consider reduced commissions, the survey showed.

India's 35-member mutual fund industry managed about 5.4 trillion rupees at the end of August, AMFI data showed. (Reporting by Nishant Kumar; editing by Sunil Nair)