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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