So as expected the ULIP bill is passed. I am not sure about my numbers but if the mf sales: ulip sales is 1:300, to even think the MF industry will be called for a meeting sounds funny. The mutual fund industry in India is going through a real hard grind – some partly its own making some by the regulator!

It is of course easy for some of us who write to say ‘the bill should not have been passed’ but market forces would have forced the decision. The mutual fund industry and the life insurance industry both have their place under the sun – and with revised costs both will cater to different markets. The removal of the entry load has actually helped some of us to ask for business without worrying ‘what the client will think’ attitude. Charging a fee is now considered legitimate and this will help the higher end distributors.

However distributors still are vulnerable. An email yesterday told me about a portal for mutual fund transactions enabling getting funded. Best of luck to them! Their model is a ‘trail’ commission model – it is in their interest to choose schemes which do well – their trail goes up.

However there is risk in their model too.

Let us say they introduce a client who invests Rs. 10,000 through a SIP in a fund scheme. 3 months later the client invests Rs. 500,000 in that SAME SCHEME, SAME FOLIO, but by using the H-Pin number given by the fund house. However the client ‘forgets’ to put the distributor’s code while investing. The trail on this Rs. 500,000 will go to the fund house (no the client will not benefit by this).

Is there a solution for this? Not sure. Unless these websites are able to convince the client that all additional purchases should happen only through their own website…(this is also difficult).

This is called REGULATORY risk. Think of all the life insurance companies – NONE of them is a stand alone company – they are all sucking the parent company. However for an Icici, Hdfc, Sbi, Kotak, Reliance, Religare, ….the amount of money involved does hurt, but does not kill.

The regulatory risk is hurting the employees though. Large scale and wholesale sacking is on, and God help the MBA graduates of the current batch. Starting salaries may not start.

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  1. Annaa,

    Thanks for the good wishes. 🙂

    Here is our model right – to provide one place online for all the investment needs of a person – mutual funds, equities, deposits etc. We are still getting there, but that’s our ambition.

    Now, when a person has an account with us why would they go and invest using the online facility of the AMC? There is NO additional benefit to the person in doing so. Subsequently, we will not be able to serve him/her for that folio – it will be under “multiple” brokers. So, we don’t see this as any enduring challenge to our platform’s modus operandi or raison d’etre.

    Our model is built around having a lot of customers doing business through us over a long period of time. So, retaining customers and their investments is the most important thing for us. Might sound trite, but that is what our business model is built around. We are getting good traction, and we are confident of success, especially with this round of funding.


    For FundsIndia

  2. Subra sir,

    Does all the MF brokers will get trail commission even if entry load is abolished? If yes, why doesn’t MF broker should share his commission (just like we do in the old LIC days), so that I will keep investing through him 🙂

  3. Rajesh

    That thinking is wrong , Why do you need commission back from doctor , People who have expected commission back from agents have got it , but then they are stuck with the unsuitable policies for years and may be life long .

    When we go to a doctor, imagine if he gives back your 20% fees , but pleads you to come back to him only , In that case you dont see doctor as legitimate , and think that just to make sure you visit him again and again , he is paying you back some money which he earned , Just because its our body health , we care , but if its our financial health , we do not .

    Agents are earning money by advising and they charge you on that , the model is built by the industry and not agents and overall , agents dont earn that much (some do) , but mostly agents are finding it very hard especially after recent guilelines .


  4. Manish / Rajesh..India is slowly catching up to loyalty programs and discounts. These are great marketing tools in a fiercely competitive economy. These are concepts – which play with human psyche – so can be applied anywhere (not just health care…but even for funeral services!!). The discounts/benefits are designed and tuned based on customer behaviour data, demographics, market trends, cultural traits, and so on…it is an endless ocean!

    @Srikanth, i also agree with you that it may not be a big issue for your site at the moment. Rather there could be other bigger issues that you must be working on – e.g. the “single sign-on” or “one login” concept which is slowly becoming visible at some sites. For a non-banking entity, this is one tool to counter the bank’s prowess. If properly implemented, it will resolve not just the MF buying, but everything being bought/transacted through this single login at your site.

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