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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