Tuesday, September 29, 2009

THE CURRENT POSITION OF MUTUAL FUND ADVISORS.


Mr.Sharma’s daughter is suffering with the disease of thalassemia and needs blood transfusion and other medicines. Mr.sharma is a Financial advisor mainly mutual fund advisor. For the past 9 years he is in this profession. Last week he was crying sitting on the footpath outside a hospital. When I asked him why he replied that he have only Rs.10000/ in his bank account and his daughter treatment needs around Rs.30000/-.If he is unable to get the required funds his daughter will have leave the earth.
When asked in detail he replied that his income have stopped due to the blessing of SEBI where SEBI banned entry load on mutual fund. His income have come to nothing. Earlier he used to earn around Rs.20000/per month, now it stands at Rs.3000/ a meager amount
This above story is not only of one Mr.Sharma but of many across India where the mutual fund advisors are their
From 1st august the SEBI banned the entry load concept for the Mutual Fund Industry. It was a really a good step as the entry load used to be adjusted against the invested funds of the investor through the units provided to the investor. Moreover in the financial market the miss selling started happening. Also the concept of selling mutual funds got changed from selling mutual funds on the basis of fund objective to the Commission objective. Which means who ever gives high commission that product will be sold by the Mutual Fund Agents. NOW PLEASE MAKE A NOTE I AM NOT CLAIMING OR INSULTING ALL THE MUTUAL FUND ADVISORS.
But I would like to know what is the condition of all those advisors of Mutual fund who 6 months before they use to earn around Rs.20000-Rs.30000/ per month.
Now there is a significant drop in their income coming down to Rs.5000-Rs 8000 per month.That income is also from the trail commission. They have shifted to sell post office Mis insurance products primarily ulip, bank fds are the few of the options left to the mutual fund advisors to sell.
Moreover the scrapping of entry load on mutual fund was done on the basis of this point to STOP MISS SELLING.I leave this debate to all my readers.
In a country like India its hard to sell advise and get fee in return to that since hardly few percentage of people understand the relative portfolio management concepts and jaggrons. The investors are more inclined to know only what I will get from this investment. If the call of getting return is of longer period most of them will turn down as every one needs quick money.
Now a question will come that the mutual fund advisors should train and teach the jaggrons and the process of portfolio building and etc. I will not get into an endless debate but will accentuate that all are running busy and every one needs quick money and that’s too quick.
The mutual fund advisors are left with nothing to sell less equity and sell other products. Insurance is now being sold like anything now. But here also I would like to depict that this Industry if faces similar threats as mutual fund industry have faced then what left for the advisors to sell. Even if they take up some different profession what the investors will do. Who will guide them. Since in the initial period their will be less investors inclined to pay the advisor so the majority of them have already taken a hit. That will make them to shift to some other filed. So finally the investors stays alone from doing investment. But not really alone.He is not at all left alone from doing investment decision alone.
If Entry load was scrapped on the basis of misspelling, then I would like to accentuate that individual Mutual Fund AMC are now distributing their products. Now the next phase of miss selling remains in their hand. Since every AMC will use lucrative ways to lure the clients. Since no rule is passed on this matter to the AMC. Every one will use this bait to make the investor invest. So where misspelling get stopped.
Now tell me where these Mr.Sharma type people will go and is the miss selling stopped.

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