From giving a kilo of gold to ensuring trips abroad for distributors, mutual funds are adopting new tricks to increase AUMs
In the last month or two, there have been a few mutual funds that have launched insurance-linked products. The reason – the markets are down and so are the investments into equity mutual funds. So how does one entice the investor? Spice it up with insurance. Suddenly there is a huge surge of applications into equity funds.
Now you may ask the reason why? What has the linking of insurance got to do with sudden upsurge in the number of applications? Well, the distributors are being lured with ‘exciting guaranteed gifts’ ranging from movie tickets to a kilo of gold, bikes and even a trip abroad. All that he has to do is to bring in as many applications as he can. And what are the distributors doing to win the race – if you want to invest Rs 5,000 in a mutual fund, he will convince you to sign 5 forms. Then he will fill in the forms for you and submit 5 applications. The terms and conditions in fine print are not even mentioned, forget being evaluated and compared.
Being a distributor myself, I am appalled to see fellow distributors and sales managers of mutual funds running against time to ‘log in’ applications. I am not against marketing, but this is pure self-gratification. The investor’s interest is the last thing on the distributor’s and sales manager’s mind. Both are simply trying to achieve targets at the expense of the poor investor. Knee-jerk reactions like this to increase AUMs (assets under management) will increase mis-selling and kill investor interest.
Are we here to advise on mutual fund investments or is it just another ‘grand sale at a shopping mall’? I wish that the authorities realize what is going on and put an end to this ‘gift mania’ before it gets out of hand.
3 comments:
The way this industry going, I think very soon we’ll all have to think of becoming advisors and discontinue being “distributors” – b’coz being a distributor will create a suspicion in the minds of the client about the true intentions behind the recommendation and / or advice being provided.
Still I think it can be a motivational factor to the distributors to remain into the business. It just gives them the product focus option. Otherwise markets are pathetic to sustain.
In my view, both advise fee and distribution commission are required to keep this business going. If you charge very high fee, no one will seek your advise (you will not get volumes). And fee alone will be inadequate for the viability of the business model.
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