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 isΒ  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….

Bechara IFA.

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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  1. Subra,

    In the long list of unscrupulous practices by bankers mis-selling products, this would rank quite low (As Kamal says in a movie, like the ‘jarigai’ in an ‘angavasthram’ πŸ™‚ )

    Wish the investor education money goes to fund how investors should not get duped by the bankers πŸ™‚


  2. in this case like i said, the ONLY beneficiary is the amc – no need to pay the distributor. They can spend on sales efforts and call it ‘Investor Education’. Like an amc cxo said ‘Investor Education’ starts with I. lol.

  3. A year ago, i had a plan to become a distributor. Somehow i gave up the idea. Now, distributors can earn only less. It’s always good for investors as the mis-selling can be avoided. As an alternative mutual funds can spend the money for educating investors to take better decisions themselves.

  4. Awesome contradiction Uday! If you are a distributor you should earn well, otherwise they should earn less!!

    Many distributors earn their fee decently – I know tons of them. However for a Aam investor to know who is a good distributor can take a very long time. If you do not need a distributor good for you…but why the hell should a MF spend money for educating the investor? and you expect them to REALLY teach u what is good? Do you expect a class by Honda on ‘How to select a good car?’ come up with ‘Therefore Merc is a good car?’. God bless u if u do. I do not. If i want something I pay for it.

  5. If Investors are well educated about the investments, they don’t need Distributors. Mutual Funds need not to educate Investors what is good, instead they can teach how to choose a Scheme. When any Investments are sold for commission, there is always chance for mis-selling. If Mutual Funds expect Investors to stick with them, they can spend money for educating them instead of giving commission to Distributors and let them to mis-sell. It is not good for any Mutual Fund in the long run. Investors may not stay invested for long.

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