Let us look at a fictitious conversation between a ‘Super Senior Vice President – Strategy and Execution’ and an IFA:
Sir my client, Subra, has invested in our company’s ULIP with the least fund management charges…but it is doing very badly…what should I do?
Sir my client is not a greedy or a crazy guy, and understands equities. Over the past 7 years he has been paying a premium of Rs. 8000 per month..and has paid about Rs. 700,000 as premium. The policy is worth Rs. 707,000. Sure he got a life cover (which is over and above the NAV of the fund)…so if he were to die now, his nominee gets Rs. 500,000 as claim and Rs. 707,000 of his own accumulation.”
What should I do now? Keep the fund scheme or should I surrender it?” He is putting pressure on me Sir.
Super Senior Vee Pee (fund investing)
You realise that equity investments should be viewed from a long term point of view and you should not be unduly concerned about the short term fluctuation. About 7 years ago when your client invested, we had paid you a hefty commission of 55% (never mind IRDA clamped down) and thus only about 45% of the amount of money got invested. So if you see the clients money ONLY, the money has doubled! So first of all it is not a bad investment, right?
Far more importantly equity should be seen as a long term investment. So if in the long run equities do well (that is what they have done so far, so I am assuming that the same thing will continue till infinity. This is basic.
Now in a group of 32 UNIT Linked funds we are 27th, you should take pride that there are 5 schemes behind us. Fund management is not an easy task. Sorry, but an IFA may not really be well equipped to understand the intricacies of investing. If you see our last 5 years ‘super slow running average on a daily basis’, you will understand that in 3 out of 5 years we have stood first in our group. Never mind that this is the period 2002-2004.
You will also find that Mr….X our fund manager was specifically hand chosen from his previous job where he was almost beating the index. Regarding costs, IRDA has now made it difficult to charge more.
IFA: Sir none of this I can tell the client…please tell me what to tell the client.
Exec: Tell him unit linked equity is for the long term
IFA: Sir, that client knows..and 2004 to 2012 is a long period no?
Exec: No, no, it is not long term. Long term is 20-22 years
IFA: Sir the Sales head said long term is 2 years, and you are saying 22…
Exec: that sales head has quit…..
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