Lies, Lies and Honest Lies
We all know who writes columns of lies, lies and honest lies, so here is a dig…
Look at the Quantum Mutual fund advertisements which appeared in the national press. The advertisement says “we have eliminated distribution commission…” so your money works for you.
There are 2 types of charges that a customer pays in a mutual fund scheme. One is the sales cost and one is the management of funds (amc cost).
Whether right or wrong, it was SEBI that abolished the ‘sales costs’ also known as ‘entry load’. Only person who can take credit for this (rightly or wrongly) is the ex-chief of SEBI, Mr. Bhave.
The asset management charges of most mutual funds is in the region of 2.5%p.a. – however as there is a sliding scale the bigger funds charge less. So while a quantum mutual fund would charge you 2.5% p.a. some funds like Hdfc Top 200 would charge you 1.86% p.a. This means there is a saving of 0.64% – and this gap would keep increasing.
If you go to www.myiris.com, www.moneycontrol.com, www.valueresearchonline.com – you will be able to find out whether Quantum was the best fund to invest or whether it was Top 200, I pru Discovery, I pru Dynamic, Reliance Growth…YOU need to take the call.
The ad then says ‘We did not launch numerous schemes to please the distributors’ – well Tata Mutual fund got the name of a ‘New scheme factory’ – valueresearchonline.com gave them that name. Sure many fund houses launched many schemes, but the client SHOULD have exercised the OPTION of not investing, is it not? In a crowded market it is the MARKET’S job to separate the men from the boys…
hmmm…
am expecting distributors of national level at Chennai to react to this news item!
Maaran
Dear John Thomas, i have argued in few of the Subra’s posts in the past why & how SEBI’s ban on entry load could distort markets. i believe effects of this policy on small town investors could be huge.
If you thought Bank’s are in the business of “robbing money” rather than “making money” by providing service, you shouldn’t be investing at all. If you thought SEBI is here to protect you and other investors, you should ask SEBI to recommend a list of stocks to invest in or list of mutual funds to invest in.After all they know what is best for you.
Why stop with investing, why don’t we ask govt to setup a regulator to regulate “marriage” market. Number of failed marriages is on the rise. That should be bad as well for everyone. Is it not.
Sambaran Mitra
@Milind,
You told that quantum charges exit load until you hold the fund for 5 years. Are you refering to Quantum Long Term Equity Fund (QLTEF)?
Valueresearch says this about QLTEF exit load:
4% for redemption within 180 days
3% for redemption between 181 – 365 days
2% for redemption between 366 – 540 days
1% for redemption between 541 – 730 days
Where is the 5 year in it?
@Subra,
You told that Bhave should be the only one to be commended for 0 entry load. Is it not true that quantum went for 0 entry load even when SEBI did not mandate it? If true, should QuantumMF not get some credit for that?
On a different note, Sucheta Dalal does not seem to be happy with Quantum either (going by her tweet). I am waiting to read the next edition of Honest Truth. I am also trying to find out articles in moneylife regarding why Sucheta feels what she feels.
On another different note, it is interesting to note that so many are taking up cudgels on behalf of QuantumMF. Most of these are investors with Quantum. So it is only natural for them do defend their action(myself included). Who wants to look like a fool?
Disclaimer: As you might have guessed, I invest with QLTEF.
raagh
Subraji,
I think you have been a bit unfair on Quantum in this post. No one is perfect. You say you have high regards for HDFC MF but did you notice that they were the one who got punished for front-running? So, koi doodh ka dhula nahin hai yahaan. Shades of grey – no black and white.
Srikanth (of FundsIndia) and Deepak: RESPECT for your frank thoughts.
raag
Sambaran: Fair points. we all have our biases. BTW, I am NOT yet an investor in Quantum. But, I somehow like them.
subra
I have nothing for or against Quantum. I have not invested in more than 3 fund houses, and that does not change. I blog for fun and as of now do not have a business model for my blog. If you see my style of writing in Indian Express, ET, Money Mantra, Moneycontrol, Money Today….it is very different from my blogging.
Saying that our fund is good because we have eliminated the distributor sounds odd that is all. With Rs. 70 crores aum and 1% revenue, frankly you cannot do BUSINESS. You just cannot do business in Mumbai with a Rs. 70 lakh topline. I have nothing against Q mutual fund’s business model too – in fact I am not a stake holder. I have also not said anything against Ajit – I think he is a brilliant thinker and writer. I have no clue about his fund management skills – but I am not looking for a portfolio manager. My broker RM has done a super, brilliant job for me and I am thrilled.
Frankly the popularity of this post is because Sucheta, Debashis and Deepak had tweeted about this.
So I have had more hits from twitter today than ever before that is all.
PS: My ad revenue from Google ads is a joke. I think it pays for the hosting charges and a cup of tea!!
Muthu
There are around 8 million+ unique investors in mutual funds. The potential investible population may be somewhere around 350 million in this country.
Abolition of entry load, in my personal opinion is a good move. I don’t think the credit goes to Quantum. There was a discussion at the time of Mr.Damodaran itself and Mr.Bhave implemented it. It is Mr.Damodaran who initiated the process by abolishing the entry load for direct investments.
I feel that it is good if the entry load is not brought back. Frequent churning may again become the order of the day. Every channel played a role in churning but the banking channels represented by relationship managers did the most.
Trail commission ensures long term rewards for making the clients wealth grow.
Without trail, like Quantum, the reach may be restricted to only few thousand people. People like us who read this blog are not the representative sample for general investor community. What is few thousands in a country like India?
With no incentive, the product would not penetrate.
As someone mentioned about rebating, people are mostly used to receive money while investing than paying for the same.
It is not that this will not change. Looks like it is a fairly long drawn process.
Until then, if there is no income from the products, it would never reach the people.
The job of the regulator is not only to regulate but also to develop the markets.
Let us hope the focus now shifts to development too in addition to regulation.
John Thomas
Dear Muthu,
There is no doubt that Equitymaster marketing mails are nothing but junk / spam mails only. Person like me will never get into that trap. As a QLTEF customer, I will send my views on this to all Quantum associates.
All of us need to reconcile with low fee based regime. Financial experts may also look into revenue generation out from related activities such as day trading. When billing related transparency came into stock markets, broking community was all against that move. However the result is that now our stock market is more vibrant and even FII’s will acknowledge this fact. Yes, we need to improve upon corporate governance and this is one important area we should improve upon.
John Thomas
Muthu
Dear Thomas,
Low fee is manageable. But not no fee.
I’m fine with 1% top line though I agree with Mr.Subra that survival may still not be easy for all.
I’m not for day trading. I would end up loosing my paltry income and also may be forced to borrow!
Probably a handful may be successful in trading but not a novice like me. I do not recommend something to others which I don’t do it myself or believe in.
May be if Quantum can support advisors like us out of their own pockets (like they released the advertisement out of theirs), we would join the Quantum army and have ONLY the intention of making money for clients but nothing for ourselves.
Let Quantum take care of our families and we would take care of clients with out any monetary incentive.
Abhishek Gupta
Congrats Subra..
Whatever it is.. I love the title Honest Lies, as I am a regular reader of The Honest Truth by Ajit Dayal.
Nobody Cares who thinks what about Quantum OR any other Mutual Fund..
Good for irrelevant debates like Arnab Goswami does on NEWSHOUR.. Nothing changes with his yelling and CATEGORICAL QUESTIONING
(Just for Entertainment)
Well.. This post is a hit ! seeing the no of comments..
Looking forward to more such posts…
Take Care.. Abhishek
IFA Galalxy
With due respect to Mr. Subra and all the members in this debate session.
I, K. Ramesh Bhat, President of IFA Galaxy bound to clarify that, we the members of IFA Galaxy do not stop sell any fund because it doesn’t give any commission, nor sell a particular fund in a big way since they offer more commission.
Also I would like to state that even though the debated fund house does not pay any commission we treat that fund house at par with others. If you get time please visit our website by clicking the link provided where you will find
http://www.ifagalaxy.com/MFapplicationform.php
the forms of the said fund house too.
We the Distributors (Members of IFA Galaxy) work for our clients only and not for any Fund house. Customer is always the King. We are there today in the industry because of our customer service. Customers are our brand ambassadors to grow in our day to day business.
Ramesh Bhat as an individual, I sell even Bank Fixed Deposit which do not give any remuneration to me. Then you may ask why I had suggested that to the customer. I always think customer’s needs are primary. Recently I had sold 75 Lakhs worth of Fixed Deposit of a particular Bank which provided 9.75 % Interest to my senior citizen client (Who is 84 years today).
Appreciate your understanding.
Muthu
As Mr.Bhat has mentioned that all (good) advisors advice on various assets and products.
When I advice on a RD or creating contingency fund through FD, no income is earned by me. Likewise when we recommend postal products, PPF and senior citizen schemes, we don’t get any income. But still the advice is given as it is appropriate for a client.
I can speak only for myself and not for any association. I don’t offer any advice or service free of cost. There should be some income for me in the overall relationship with a client.
Obviously I cannot take care of my customers without taking care of myself.
As much I exist because of clients, I do feel that clients too benefit from our knowledge and integrity.
Any relationship exists only if there is a mutual need. So I do believe that as much as I need customers that customers too need me.
I do not want to work with customers when there is no monetary incentive for me in some form.
I don’t see why it should be any other way.
When I do debt counselling for people who are in deep debt, I charge only a nominal fee. In exceptional cases, I’ve waived the same off too.
In whatever way possible, either through blogs or media, I do contribute a small way in spreading financial literacy. Not because I want to serve the society but because I like it.
If the society is in any way benefited my actions, it is only incidental and not intentional.
Akilan
hi,
I had the opportunity to read the entire blog,and also am investor in MFs, tru online… how ever what i see here is you guys are cribbing about what quantam has done ,he has the guts to tell the world that any thing is possible. Instead of cribbing or crying out try to do something which canbe done. As a group you could not fight against BHAVE, and now your are trying to cry at QMF.
If you want to effectively do justice to your profession
. ASK AMC TO SHOW TRANSPRENCY IN NAV(TRY TO BRING RTI IN THIS)
. AMC TO SHOW PROPER ACCOUNTING OF SCHEMES
. ASK SEBI TO BRING IN RULES FOR DISCLOUSURE OF THE JUDGEMENT OF SMALLER SCRIPS OR SCRIPS WITHOUT ANY TRACK RECORD
Try to bring the AMC into trouble tru the regulator.
See the hefty packages taken by CEO of all AMC(running into crs)
try doing this instead of shouting
sorry to use this “BARKING DOGS SELDOM FIGHT” LET US NOT BECOME BARKING DOGS.
LET US BECOME ELEPHANT WHEN IT COMES TO TAKING REVENGE.(THE MEMORY OF ELEPHANT)
CHEERS
Akilan
Paul
Srikant,
Dont worry for not being big. You have the potential to grow big and you will be biggest one day.
It is the ideas that come from both Quantum and FundsIndia attracted me to them. FundIndia helped me to save paper, ink, time and phone calls. They made buying mutualfunds simple as buying equity.
Special thanks to FundsIndia. Hats off to you guys. But your support people still needs some training. Communications(by email) seems to be a bit difficult to understand.
I invest in Quantum to support them. They have concepts. Let them execute it. After-all, all investments are bets for good returns. Let me bet on their concept and process rather than on a fund manger who gives me good returns.
Srikanth
Paul and others, Thanks for the kind words!
Paul – About support staff: We have a good, smart set of people who are trying very hard to learn and provide good support. With time, they will get better. Feedback from our customers is vital in this regard. Thanks!
Srikanth
FundsIndia.com
Muthu
Mr.Subra – What are the advantages of going through aggregators like FundsIndia – both for the investors and advisors? It should be more than paperless transaction as many MF websites themselves offer the same facility. If asked for, MFs also provide customized online transaction links for the individual advisor websites.
For example, what advantage one gets buying Quantum MF from FundsIndia instead of directly buying from Quantum website itself?
Since aggregator is a new concept, you may share your thoughts on the same.
Srikanth
Muthu,
Answer in two parts:
1. Aggregation – Investors get a consolidated view of their holdings in a single snapshot at any time with us. In a single login, they can transact in multiple funds/schemes in one transaction. SIP can be setup with a single debit to go to multiple schemes from different fund houses (portfolio SIP).
2. Apart from aggregation, FundsIndia also provides a host of value-adds that nobody else provides:
https://www.fundsindia.com/content/jsp/corporate/ValueAdds.do
Thanks,
Srikanth
Muthu
Srikanth – I just sent you an email and seeing the response here!
BLRBoy
A thought provoking post Subra. I am loving the comments here. Heven’t seen such a spicy discussion on Subramoney for quite some time now.
@ Srikanth, I am one of the investors using fundsindia and I think that fundsindia is FANTASTIC. Keep up the good work.
I will now certainly invest in QMF’s LTEF (thro’ fundsindia). Don’t worry Srikanth, I will not use fundsindia only to to invest in QMF’s funds. I have invested in a couple of other funds too – all of which are doing well!! I am sure a lot of your investors who are investing in QMMF’s funds are also investing in other funds.
In fact I am of the opinion that fundsindia is distributing QMF’s funds as a service to thier investors who otherwise had to invest directly with the fund house. Someone like ICICI Direct is not interested to distribute QMF’s funds and we all know why!!
@ Muthu, I fully agree with you that the advisors need to be paid a fee as with any other profession. I am currently not paying any fee to fundsindia for my investments but don’t kknow how long this will last. From Srikanth’s comments above, we may be charged a fee in future but believe me, I will be the first one to accept and continue using fundsindia if they decide to charge a fee.
Hope the fee will be reasonable Srikanth!! 🙂
Rajesh Manoharan
Good discussion!
Just a thought.. not sure how far its valid. Quantum (as far as I know) haven’t declared any dividends on any of their schemes. Bit confusing why is it so? By not declaring dividends they are running the schemes equal to Growth with no money flowing out to investor and locked in for 2 years.
I agree its their birth right 🙂 to declare or not dividends, but giving performance by locking money against the performance even after providing dividends by HDFC Top 200 seems not a worth comparison. HDFC Top 200 has created better value in that terms to investor.
Disclaimer : I don’t hold any MF 🙂