“Equities are risky, so I avoid mutual funds”

Authentic customer statement. Of course I would not have been surprised or shocked if my driver or maid servant had made this statement. It was made by a bureaucrat – obviously by now you know in which ministry!

Do not wish to talk about this person, but it is really amazing how the people who ‘run’ and ‘govern’ and think they do understand the ultimate customer’s needs are actually only savers, never investors. If you see the SEBI committee on ‘Mutual Fund Advisory’ – it would be interesting to see the mutual fund investments of each of the members! The committee contains ‘manufacturers – the amcs’ – there is no representation of the Investor in mutual funds, or the distributor. The AMCs have been described by one the magazines (who anyway depend on the advertisements) as NFO factories because of their selling skills – the sales force can only sell NFOs! One bank was selling a NFO recently by telling the customer “Sir, you will get full allottment of these units at Rs. 10 if you buy it from our bank” – which is an amazingly true statement! So here is a committee which is indifferent to entry loads (though most of them privately admit that the entry load is a subsidy for their growth – other wise their salary bill will go through the roof), who have decided to abolish the entry load. Good. Will the small IFA die? No but he will surely shrink – his time given to the mutual fund business. He will get people to do more day trading, sell more life insurance, car loans, educational loans, post office schemes, etc. The question is how will the manufacturers react? Some old houses with a great reach can be more easily challenged – if they have the willingness to hire people and pay well – are JP Morgan, DWS, AIG, listening?

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3 Responses to ““Equities are risky, so I avoid mutual funds””

  1. Sarcasm at its best!! 😉

  2. Umesh Devadiga on June 24th, 2009 at 7:38 am

    This is a letter that i received from a Mutual fund distributors’ forum…

    We must first stop the business the following Mutual Funds who are the members in SEBI Mutual Fund Advisory Committee:-

    Mr. Milind Barve MD, HDFC AMC
    Ms. Ashu Suyash CEO, Fidelity Fund Management
    Mr. Chaturvedi V P MD, Tata AMC
    Mr. N.P. Ghanekar MD, JM Financial AMC
    Mr. Jaideep Bhattacharya CMO, UTI AMC

    We should not give any business to these mutual funds until they resign from the SEBI Mutual Fund Advisory Committee.

    If they resign form the committee that will be great slap for SEBI.

    Please understand and think and act.


    Ramesh Bhat
    IFA Galaxy

  3. Umesh Devadiga on June 24th, 2009 at 7:43 am

    The biggest beneficiary of this move is perhaps the bigger fund houses like Hdfc, Uti, Reliance. Over the past 2-3 years these fund houses have been opening offices all over the country – of course partly helped by the Entry Load subsidy – which was borne by the customer. If the customer has to pay me money for investing advice why would i not suggest the National Pension Scheme? So I think the pfrda is also one of the persons who is a big beneficiary of this move. Losers will be Hdfc, Reliance, UTI…the same people who seem to have initiated this move!! What an irony. However there is a rumor that some of the mutual funds have decided to create their own sales force – this seems like a joke at least with the current cost structures where a Regional Manager gets a salary of Rs. 25L in a mutual fund and about 35 lakhs in a life insurance company

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