As the commissions in the mutual fund industry has been eliminated agents are finding innovative means of earning money. One such method is to approach people with existing investments and saying ‘Sir since you have shiftend residence (retired, married, changed jobs….could be any excuse) it is easier for you to shift ALL your business to me. If you shift to me, it will become easy for me to give you service like giving you a statement,….blah blah…so please shift the EXISTING business to me’.

Or just producing a letter saying ‘Please shift…folio no….to …..a new arn..”. Most clients will not even understand what is happening, and will happily sign this letter.

The third category is a big distributor who can access the database of the asset management companies either talk / write to the HNI customer and say ‘Please sign this letter…and you will benefit…” One easy way is to give the ‘client’ tickets to an IPL match..and ask him to sign one simple letter which he does not understand. LOL.

If you are wondering what is the advantage, the TRAIL COMMISSION which was to go to the original broker who did the deal will suddenly start flowing to the new agent. Is this right or wrong? I have no view, but clearly in 4 out of 4 cases that I had seen this happen, the CLIENT did not KNOW that he/she had signed such a document. In all the 4 cases, the agent who was AFFECTED was in business, was doing business with the SAME clients, and was continuing to work with other clients too.

Immaterial of what IFA GALAXY, FAAIDA, and other associations do, I think the individual trying to make a career / living out of mutual fund distribution is quickly on the road to destruction. Companies like NJ, Touchbase, Wealth zone forum, ING, Indiainfoline,…will soon eliminate the small guy, or at least marginalize him/her and quickly.

The industry body (ok its Christian name is the Mutual Manufacturer’s body biased towards the big guys)  has issued warning notices to HSBC, NJ India Invest, HDFC Bank and Kotak Mahindra Bank for not complying with NOC norms and luring investors to change distributors to garner trail commission. If you are wondering who is N J Invest, it is the same guys who get endorsed by all mutual funds AND THE REGULATOR in public meetings. Read Moneylife for the real story….

The Association of Mutual Funds in India (AMFI) has finally woken up to the messy game of assets under management (AUM) transfer and rampant mis-selling of mutual funds by banks and national distributors.

The industry body has sent warning notices to HDFC Bank, HSBC Bank, Kotak Mahindra Bank and NJ India Invest to stop this practice, reports CNBC TV18. AMFI has also sent a stern signal that if they don’t comply with the guidelines, AMFI will consider withdrawing their licenses.

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  1. It is a customary and aggressive tool of the Bank to increase their AUM by shifting the Advisors by their code. Also, Most of the SIPs done by Bank have been stopped before the term reaches. Only the Branch Managers and Heads of Strategy would know the secret of the increasing their Other income or Fees income, irrespective of any ethicals and standards in the Market on their own or by Sebi orders.

    Let the Sebi or AMFI wake up their strategy to diggggg the process of Investments and switches by Banks and National distributors to know the real Business model to earn or suck the Clients money in the name of diversification (?) or some thing else more attractive..???

    Poor Investors
    Poor Regulatories too

  2. MY take on this is very different. The rest of the world does not owe the fund industry a living. So if a disbributor does not know what to do if the commission is reduced is not a NATIONAL problem, just a problem for 5-2,000,000 exeutives / agents of this sector. Secondly even though I have an account with Hdfc Bank, but every time I am at the ATM there is an icici bank rep asking me whether I wish to open an account with them. One day when I am upset with H bank – I might just open the account. So similarly one bank chasing a customer for the AUM should not be an issue…or am I missing something?

  3. here is a note from ifagalaxy….

    I just received an SMS from ICICI , offering a ‘ free service of converting offline mutual fund investments to online investments ‘. On calling the number, the person spoke about ICICI offering a free service. Not knowing that Iam also an ARN holder, he was very meticulously camouflaging the latest nail on our coffin from SEBI- NOC not required for change of broker – in the garb of providing additional Free service and thereby gobbling a huge trail commission from the neighbourhood distributor. When I insisted on the the revenue accruing to ICICI on this ‘Free’ service, he didn;t talk of the trail. Instead he stated that ICICI would manage from the ICICI DEmat account yearly maintenance fee of Rs 500 per account holder.
    I think this is absolute unethical means adopted by ICIC to eradicate the friendly neighbourhood distributor. God only knows what more is in store for all of us . May be this is what SEBI wanted…

    K V Balaji
    Certified Financial Planner,
    116 Gokhale Plaza
    Station Road, Chinchwad , Pune 411 033
    Tel: 0091-020-27352281,46752370
    Mob: 9890600234,9370935720

  4. Poaching is one of the approaches made by People/Institutions to acquire with less cost /efforts.Its is a path adopted by those who adopt short cuts. History has shown that it boomerangs !! Keep your base strong , dont divulge too much of your clients( any way they have a data base of your customers, specially those who have BANKS likes of Groups who have a footprint in INS/MF/EQUITY/BROKING) and keep your principals on a need-to-know basis .

    Srinivasan TS-CFP
    WealMan Associates

  5. Pingback: How much does Mutual Funds Agents earns in commission ?
  6. also provide free service,as a customer we don”t have choice to save comission which are directly paid by mf company to fund management houses,except we can save only entry load and exit load.
    whats opinion about fundsindia.

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