For the past one year Mutual funds are falling over themselves to please the bankers. However it is not having a great impact on the net sales. For many mutual funds, the ‘net sales’ figure by the big banks is NEGATIVE figure.
When you talk to a banker however they are not so negative, and hey they even have a POSITIVE figure in some cases.
So you keep wondering what is happening? Well I did. The CA in me REFUSES to leave figures unreconciled….ever. An old habit.
I suddenly realised one amazing trick that they played….here it is:
One investor wanted his mutual fund units dematted….and he applied to his banker. The banker should have given an application which said:
“I wish to demat the following units held in folio number…………. ” INSTEAD they gave him a form which said
“I wish to demat the following units held by me in folio number………….AND CHANGE THE ARN From the existing number to………….”
In their over enthusiasm they got the ARN number changed.
Now when you do something like this, there should be beneficiaries and losers right?
Beneficiary : None, directly, none.
Loser: the original individual IFA who stands to lose trail commission. Most smart IFAs work for trail since the upfront commission is now close to NIL.
If the bank did NOT benefit, why did they do it? Fair question, I also asked the same question.
Answer: to negotiate better rates with the asset management company (aka Mutual fund).
Is there a solution to this? No. Not really, unless SEBI brings back the old provision of asking the FIRST Arn holder for his permission. This is unlikely to be brought back, because it puts the investor at a disadvantage.
Completely unintended beneficiary: the Mutual fund (aka Asset Management company). They do not need to pay trail commission TO ANYBODY. Not to the first holder NOR to the second holder.
The law is this amount of money has to be spent on the Investor Education Programs. Hmmm all of you know my views on such programs, right? LOL….
If you have a choice cease being an IFA. You are better off with a job, if you can find one.
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