Ulip or mutual fund?

Surely you have a mutual fund and perhaps a life insurance policy too. Correct? Why did you buy it?

Was it some good planning that you did or just a friendly neighborhood agent who asked you to buy? Most life insurance and mutual funds have been bought because an agent approached a client. Frankly I have my doubts whether the largest selling mutual funds and the largest selling life insurance products are the best in the class :). However, what is visible sells. As simple as that.

Icici Prudential life insurance has the widest reach amongst life insurance companies, and arguable it is Reliance Mutual fund amongst the mutual funds. And they may not be the best performers in fund management.

Also coming to the number of agents – the mutual fund industry has about 50,000 people who have passed the exam (and thus are allowed to sell mutual funds). However, the life insurance is a product sold by at least 3.25 million people!! There is no comparison at all in terms of reach. So suddenly if you find the AUM of the mutual fund industry looking puny in comparison to the  ULIP aum, do not be surprised.  In fact by  2011, the  life insurance industry  may even have the annual collection at a number far, far higher than the equity aum of the mf industry!!

There is another big advantage in selling life insurance – the upfront commissions are far higher than the mutual fund business. Also in case of mutual funds, the clients may be able to go directly and thus deprive the mutual fund agent of his livelihood.

The negative side of the financial services industry in India is there is an extremely large UNQUALIFIED set of people who sell both mutual funds and life insurance plans – and they would obviously prefer selling a higher commission product – so buyer beware!! Caveat Emptor, as they say.

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