Managing Director’s confession

I hope you are not looking for the ‘mea culpa’ message of Raju…of Satyam…this is different!

I recently met the MD of a financial services company – obviously I am not naming him/her. It also does not matter whether it is a brokerage house, mutual fund, life insurance company, bank or a distribution house. So I will continue to call it a financial services company.

He said “I have a funny situation. I meet distributors (whom I pay only on results) who tell me “In this market selling equity or any product is difficult”. Then my local manager (whom I pay Rs. 12 lakhs) tells me “In this market selling equity or any product  is difficult”. Then my regional managr (whom I pay Rs. 20 lakhs) tells me “In….difficult”. Then my national level manager (whom I pay Rs. 40 lakhs) comes and tells me “In this market….difficult”.

I know another MD who is struggling with his projections – and trying to make financial sense out of being a producer and distributor in mutual funds, general insurance, life insurance, brokerage business, etc. He has very co-operative shareholders who are willing to pump money into the company provided it makes business sense. Like I said, he is struggling – he is finding it difficult to tell a lie!

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2 Responses to “Managing Director’s confession”

  1. This is not difficult to believe. I deal with a finance company – that supports a life insurance company, a general insurance company, a brokerage company, a mutual fund, and an nbfc. NONE OF THEM are cash flow positive (forget break even)- and as a parent company the main company is required to pump money on a DAILY basis. If the p/e of the parent company goes for a toss, GOD BLESS THEM.

  2. Almost all life insurance companies expenses are being paid by the promoter. This has not stopped them from paying high salaries, having extravagant parties, ‘offsites’ in foreign locations…they need to hope desperately that the end customer (the hapless policy holder) does not find out that he will get no ‘attached bonus’. The salary cost for the premium collected is funny only if you are not a shareholder.

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