Tuesday, July 30, 2013

Prajna Capital

Prajna Capital

Bank relationship managers and Trust factor

Posted: 30 Jul 2013 05:18 AM PDT

Business Standard Article (Mumbai Oct 22, 2012)

Within hours of receiving ~1 lakh in his bank account, Murtaza Nulwalla received a call from his bank relationship manager (RM) proposing that he use the money to buy an annuity plan. The RM sounded convincing enough and Nulwalla agreed.

But, he realised his mistake soon enough when someone pointed out that he had already been paying ~75,000 for three child plans. When he sent an email to get his purchase cancelled, the RM first called back to convince him not to do so. Then, he issued a veiled threat that Nulwalla would lose his first premium. The email, however, came to Nulwalla's rescue as the bank cancelled the purchase on the basis of his complaint.

However, not all are as lucky as him. Bank accountholders regularly get calls from RMs, who promise to give the best investment plan, the best home loan, the best credit, and so on. Many end up buying these products, some of which are irrelevant and may even be harmful for their finances.

Bank RMs sell a range of products of their insurance and brokerage arms – such as investment-cum-insurance plans and demat accounts. Sometimes, they even convince you to dabble in the futures and options segment or buy exotic products that may be a mix of commodities, futures and options, forex trade, equities, and so on.

All of these are done under the pretext of giving your returns a fillip, offering you post-retirement security, and protecting your children's future.

The fact, however, is different. Selling these products earns RMs high commissions. If their salary package is, say, about ~6-7 lakh, the target for 'income achievement' is ~80-90 lakh —about 12 times the salary. An RM has to generate that much income, or at least 75 per cent of it, to earn his incentive. It is possible for an RM to earn ~3 lakh every quarter if he meets all his targets.

If you were to lose money or were unable to bear the cost of an insurance product, it would be your responsibility. "Though people come to me to file such cases of mis-selling, it's not always possible for want of evidence," explains consumer activist Jehangir Gai.

Business Standard sent emails to a number of private and foreign banks but none responded.

However, many bank executives agreed off the record that banks' high concentration on fee income leads RMs to sweet-talk their clients into investments that might not be in the best of their interest.

Stock market and mutual fund investors and buyers of insurance products are more or less aware of the commission earned by their brokers, distributors or agents. But, there is little clarity on the commispaid to a distributor or an agent. So, it is not a case of overcharging the customer. It could even be cheaper, because the banker is an employee and Another problem: When a for at least seven to eight years, there was little chance of getting reasonable returns from an insurance product. No wonder, the financial planner hung up, disgusted.

The more complicated part is the redressal mechanism. A bank is regulated by the Reserve Bank of India, but its insurance arm is under the Insurance Regulatory and Development Authority and the brokerage arm under the Securities and Exchange Board of India.

Under these circumstances, you might have been sweet-talked into buying an insurance product by a bank employee, but the redressal might often lie with some other regulator.

The good thing Nulwalla did was sending the email immediately. Also, his old RM rejoined and helped him reverse the payments. What had spoilt the possible deal in this case was Nulwalla's realisation that he had been approached the same day ~1 lakh was deposited into his bank account. He has decided to close his account with the bank.

In ideal circumstances, the role of an RM is to provide a customer with a single-point contact for all his banking needs. But, with RMs under pressure to meet sales targets, the line between the customer's 'need' and their own 'target' gets blurred.

Many a time, the problem lies with customers as well. "Customers should also be aware of the extent of risk they can take and returns they want to earn before blaming their RM for missselling," says Gaurav Mashruwala, a financial planner. If you tell your RM you can invest money for 10 years, the RM may suggest investing in equities. However, after three years, if you find that your investments are not doing well because the equity markets are falling, it is not the RM's fault," he adds.

They hawk the 'best loan, credit card, insurance products, forex deals'... but do you really need these?

Be Wary If Your Relationship Manager :

·Is vague about the terms and conditions of products

·Dangles the 'limited period' offer |Does not provide information about investments that haven't been made through him

·Avoids your calls during bad times

·Does not give satisfactory responses about your investments

·Tells you to just sign application forms and promises to take care of your KYC requirements

Confessions of a Relationship manager


I started as a relationship manager seven years back. During our training, we were told our performance would be gauged by the number of products we were able to sell. Our incentives would also depend on that.

The easiest product to sell was insurance. Often, customers did not take the trouble of going through the product documents in detail. This was, in fact, good for us. Sure, we were told that mis-selling could land us in trouble. But, as senior colleagues pointed out, by the time a customer would realise a policy was not the best for him, it would be too late for him to back out.

So, I was selling insurance policies from day one, even as I cleared the Irda certification exams only two years later. During this period, one of my senior colleagues, who had been certified, would sign as the agent on the form, as I was not qualified to do so. Thankfully, none of the clients I sold policies to noticed this.

Once or twice, I have even put the initials of my clients on forms, if those were missing at some places. They wouldn't know about it because they just signed the application form and left the rest to me. As I look back, I realise, doing such things, if discovered, could have cost me my job.

Besides insurance policies, I also sold different kinds of credit cards to the same customers. I had this group of 10 customers, all of whom were high-networth individuals. The concept of discount worked wonderfully. So, the same customer took one card for discounts on airlines, another for discounts on spas and the third for discounts on hotel bookings. I also sold add-on cards for family members.

Not many of them used these cards, since they already had other credit cards, but they bore the annual fee. It didn't matter much to me, as my incentive was based on the number of cards I sold.

Today, it is tougher to push insurance products, as insurance companies directly call customers to check if they know about the product, premium and so on. Credit cards are also not being sold as recklessly as earlier, due to the rising cases of defaults. But, as long as banks continue to push RMs to sell products, there will always be some instances of mis-selling.

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Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

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Corporate Bond Mutual Funds

Posted: 30 Jul 2013 04:17 AM PDT

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Call 0 94 8300 8300 (India)

 

 

THE various movements in the debt market have changed the profiles of several instruments in terms of popularity. Corporate bonds too have seen something similar, with overall interest rates in the economy dipping and prompting more trading in these bonds.

Also impacted have been mutual funds, with an increased interest in corporate bond funds. Here is an overview of the scenario and what it means for investors.

Corporate bond funds:

There are different kinds of debt funds in the market. They invest their corpus into debt securities, which keeps the risk element within limits.

The debt portfolio offers the investor several options as regards what exposure the fund would get. One option is to go for corporate bonds.

Here, the fund will invest its corpus into bonds issued by different companies. These bonds are then traded on the debt market. This allows the fund-manager to handle the scheme in accordance with the mandate he has got.

Additional activity:

There are already three corporate bond funds in the market, namely Templeton India Corporate Bond opportunities, ICICI Pru Corporate Bond Regular and Principal Debt opportunities Corporate Bond. The investor can thus easily pick the fund for his portfolio. He may have a wider range of choice in future, with more fund houses planning similar schemes. This is good for the investor who can look at building a good, varied portfolio.

Investment decision:

But the investor must make an informed decision while choosing a corporate bond fund. For a start, the investor can chose some simple, debtoriented funds. Once he gets more familiar with the complexities of the market, he can vary his selection. Investors looking to opt for this route must assess the degree of exposure this would mean for them and the attendant risks. A corporate bond fund would be an investment option when this would seem to offer a higher yield or return.

This would happen when the market conditions, suggesting higher chances of capital appreciation. Usually, corporate bonds give a yield higher than government securities do. But they come with an added element of risk. So both factors need to be assed. An investor should select such funds for his portfolio when they cannot invest in such securities directly. The risk is that a sudden turn of events, like the recent steps taken by RBI to curb rupee speculation, may hit the performance of such funds. One must also take a longer view of such investments, because these funds need adequate to show results.

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

  1. ICICI Prudential Tax Plan Invest Online
  2. HDFC TaxSaver Invest Online
  3. DSP BlackRock Tax Saver Fund Invest Online
  4. Reliance Tax Saver (ELSS) Fund Invest Online
  5. Birla Sun Life Tax Relief '96 Invest Online
  6. IDFC Tax Advantage (ELSS) Fund Invest Online
  7. SBI Magnum Tax Gain Scheme 1993 Invest Online
  8. Sundaram Tax Saver Invest Online
  9. Edelweiss ELSS Invest Online

------------------

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver MutualFunds Invest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund


Invest in Tax Saving Mutual Funds Download Any Application Forms
Buy Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now

UTI Mutual Fund - Fund Manager Change

Posted: 29 Jul 2013 11:59 PM PDT

Invest In Tax Saving Mutual Funds Online

Call 0 94 8300 8300 (India)

 

 UTI Mutual Fund announced a change in fund manager for UTI Services Industries Fund and UTI Banking Sector Fund. Lalit Nambiar takes over as the new fund manager of these schemes with effect from July 29, 2013.

He has replaced Arun Khurana

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

  1. ICICI Prudential Tax Plan Invest Online
  2. HDFC TaxSaver Invest Online
  3. DSP BlackRock Tax Saver Fund Invest Online
  4. Reliance Tax Saver (ELSS) Fund Invest Online
  5. Birla Sun Life Tax Relief '96 Invest Online
  6. IDFC Tax Advantage (ELSS) Fund Invest Online
  7. SBI Magnum Tax Gain Scheme 1993 Invest Online
  8. Sundaram Tax Saver Invest Online
  9. Edelweiss ELSS Invest Online

------------------

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver MutualFunds Invest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund


Invest in Tax Saving Mutual Funds Download Any Application Forms
Buy Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now

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