There are many problems facing the mutual fund industry…in an interview with Dhirendra Kumar of Mr. Sinor of Amfi says “the biggest problem facing the mutual fund industry is the mis-selling by the distributor”. This is a little amusing.

The insurance regulator and Sebi regularly make noises about mis-selling, however Amfi and the Life Council do not DO anything about the people who facilitate mis-selling. In a country with 9000 listed companies, all mutual fund schemes put together invest in 200 companies, how many mutual fund schemes do we need? Not sure, but there are not less than 200 equity schemes! 43 mutual funds * 5 schemes at least = about 200 schemes! Then there are balanced schemes. Equity schemes are large cap, small cap, mid-cap, top 200, top 100, top 150, K-10, K 30, …..with so much confusion and an untrained distributor, Mr. Sinor you really thought that every scheme SHOULD sell? So marketing managers encouraged churn – the distributor goes where the money is. If index funds, term insurance, good advice were encouraged by the industry (high commission dude) agents would have sold that!

Right now the MOST MIS-SOLD product is financial planning. Unless there is some independent organization supervising financial planning (they are not under the purview of sebi unless they are selling mutual funds).  Also there are media houses who are now in financial products distribution. What a joke!

Amfi is a manufactuer’s lobby (like the Life Council) and actually has no business talking about distributors. However since distributors do not have a body for themselves, they are allowing Amfi to speak on behalf of the distibutors….what are Ifa galaxy doing?

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  1. “Right now the MOST MIS-SOLD product is financial planning.”

    Not quite sure what meaning to derive from this statement.

    May be a fair share of the problem comes from common man’s attitude -He likes crap/bs to be marketed to him than putting effort to find the nickel. And he probably believes and over estimates that if he is putting any kind of effort into anything then he likes to find nothing but gold.


  2. “Unless there is some independent organization supervising financial planning”

    no regulator can stop any misselling.lets not pin our hope on some intelligent super human being sitting on top telling how people should be investing.whats with the irrational faith in some regulator babu taking care of all of us.
    people get the advice they deserve.if they work with intelligent financial advisors,spending time and effort,they usually get good solid advice. those who do it in a hurry under salesman’s/agents pressure get just what they deserve.

  3. Violently disagree. 2008 world events is proof that self regulation does not work. Nobody believed the Medical Council – now it is scrapped. C A institute did not take action AFTER RBI made remarks about PWC. The partner who supervised Global Trust Bank supervised Satyam.

    So there has to be an ombudsman to whom I can complain about a FP giving poor or bad advice. Or not giving me in writing a Statement of Advise – there is no format by the cfp institute.

    Hope is if the C A institute comes out with a CA (Financial Planning Services) – a 6 month course for CAs – and ensure that such professionals DO NOT / CANNOT SELL at all.

    Till then keep praying and fingers crossed. Regulation, NO, but Ombudsman YES.

  4. The common man does not value financial planning.The distributor goes where the money is.Very true.When the distributor takes the rouble of explaining the schemes does the paper work and demands a fee of RS.50 or Rs.100 the investor is not willing to pay.Particularly in small town india where the banks and mutual funds have to come up with Auto Debit ECS facility etc.He would rather sell a fixed government security which pays him 6 percent for RD and 1.5% for others or insurance which would give him nothing less 35 % than sell a SIP of mutual fund which will often get rejected and for which no commission or a 40 paise commission will be paid

  5. “2008 world events is proof that self regulation does not work”
    on the other hand it is totally evident that it is the very regulator that caused the financial crises.the greenspans and the SECs who were asleep at the wheel. they just provided a false assurance that everything is well. they provided the incentives for the moodys and lehmans to ruck amok.remember the greenspan put?

    regulators have no more information than you and i.i am totally skeptical about their doing anything good by design.

    an ombudsman is useful if it something of a legal entity : that is a totally different ombudsman if it is like a civil court may work.a fund house may cheat me and i should have the right to paid damages.
    enforcing contracts and agreements and the law is a valid job of the govt.not telling people how to sell or not to sell.

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