|
I was to receive an important document by post which I required urgently. On not receiving the post before the date I needed to get it I was totally perplexed. I went to the post office searching for it and I found it there. Later I came to know that the postman came to my colony but without even searching for my home, just gave the reason of failed delivery of post - that the house was locked. I was totally disheartened and troubled by this behavior of our Indian postal services but then we all know that this is how government departments work. "Thank god we've private companies to get our work done easily and without any hassle and we also get better services." My wife said. I asked myself "Really?"
There's a leakage in our primary retail product
My most important motive since 23 years in this industry is to get client's trust in Mutual Funds and teach them its benefits. If a person trusts something he/she is surely going to invest for a long time and do not lose hope in bad market conditions. I find my sole responsibility to do this before making anyone invest in mutual funds. And I find it really a nice job to help people save and grow their money for their goals. I've served many retail clients who have saved a lot through SIPs. They have made their friends and relatives invest in mutual funds too. Undoubtedly, SIP is the best way to invest and grow your wealth in the long term.
In my earlier article (Click Here),I had raised certain issues which are faced by everyone of us these days. This is another significant problem.Everyone faces problems but sometimes the limits are crossed and we need to find a solution quickly to overcome the problem.
I recently met one of our industry's stalwarts and he told me that the problem is that many small investors are coming into the industry but there is a leakage. I agreed. I make lots of people invest in mutual funds via SIP and there is a leakage in my client base. Lots of clients are getting out. I analyzed my situation and I came to know that lots of investors are perplexed seeingtheir SIPs getting rejected. Every day we do lots of SIPs but the leakage creates a problem. Like the story mentioned earlier sometimes the reasons are so ridiculous and finally the investor, AMC, our industry and the distributor is the one who has to face the loss. What is the benefit of making new clients when we are not able to stop this leakage?
6 action points to stop the leakage
When even a single investor loses faith, we need to be concerned. I analyzed this problem and these are the following concerns and their required solutions as per my opinion -
We observed that monthly/ quarterly installments are not being credited in the SIP accounts of many of our investors.AMC need to inform us the details of such investors with specific reason in each case for a period of say last 24-36 months. We observed that in SIP accounts, entry related to credit of units are reversed due to ECS mandate not received by the concerning bank of the client. So AMC need to send ECS mandate to the concerning bank regarding all such clients under copy to us & get acknowledgement regarding receipt of ECS Mandate from the bank. Due to this reason we as well as AMC and the whole industry is losing business due to non credit of SIP installments in the SIP accounts of our investors. AMC in such cases usually send the list of your clients through their banker to the respective bank of the clients through RBI for debiting their account on monthly/ quarterly basis. The respective bank does not debit the relative account of such client with such amount due to non receipt of ECS mandate. Instead the banks debit their bank charges in the accounts of such clients giving the reason "ECS Mandate not received". Clients are not able to get the units in the fund at the NAV prevailing on then respective dates. In future, if NAV of units of respective fund increases will the AMC compensate the financial losses to the client? Sometimes SIP amount is not debited in the client's bank accounts due to non availability of sufficient balance in their account or due to mismatch of bank signature. In this regard AMC's do not inform us. If AMC's make the practice to inform us in such cases we may know factual position & take up the matter with the client thus we can help the investors. In such situation, every month although SIP amount is not debited but bank charges are debited in bank account of such clients. When the clients go through their bank passbook/statement of bank account, they get irritated & complain tous regarding non debit of SIP amount but debit of bank charges in their account in spite of sufficient balance in their account and for no fault on their part. As a result industry is losing business. We are also not getting brokerage in such accounts from AMC and thus incurring financial losses in spite of our best efforts to fetch new investors. In such situation who will compensate financial losses of the client as well as ours? Another source of SIP leakage is frequent changes in KYC requirements.
Recently we received yet another communication from AMCs that additional
KYC details are required and that SIPs will be discontinued if additional
details are not provided within the next few weeks. Each time KYC rules
change, if we have to go back to all existing SIP clients, there are bound
to be slippages - which means that SIPs will get discontinued, although
KYC details were perfect when the SIP contract was first entered into. I
wonder what happens in the case of ULIPs and recurring deposits - products
that also help investors save regularly. Do their ULIPs and RDs get
stopped if additional KYC requirements are not provided years after their
savings programs started?
Who is benefiting by ignoring the leakage?
SIP is the way by which most of the retail money is coming into the industry. Our AMCs have also been consistently advocating SIPs as the ideal investment strategy for retail investors. I would like our AMC partners to understand one thing very clearly: just as a positive returns experience helps spread word of mouth referrals from satisfied investors to their friends and relatives, each and every investor who exits the industry when he gets irritated with these leakages, also spreads word of mouth negative publicity about how complicated this product is. The more we ignore plugging these leakages, the more dis-satisfied investors we are creating EACH DAY. The more we do this, the more uphill is our struggle to bring in new investors into the industry.
It will be a real pity if a product that is so beautiful and which can help investors so much, fails to get its due share of retail investor wallets, only because we did nothing to plug these leakages and ensure a satisfactory investing experience.
I hope our AMCs understand that the more complicated the product seems to an investor, the more is the return expectation from the product, to justify the pain and effort involved. If we are able to make the investing experience truly a delight, it will therefore help all of us in the value chain.
I would urge AMFI's Operations Committee to please take cognizance of these points and urgently tackle and resolve these issues. Leakages never suddenly stop on their own, they often grow bigger, unless they are plugged immediately.
Share this article
|
Advisor Speak