Worst Technique Selling MF - How can we act on this? Please Share your Views

IS this Correct?

Can an ARN Holder pay/share their commission back to his investors?

Will AMFI Look into this and take action 

on the ARN Holder, Quantum Information Services P Ltd (PersonalFN) ARN-1022

See what Rules (AGNI) and 

Code of Ethics of AMFI say......

THE AMFI CODE OF ETHICS

4.0 PROFESSIONAL SELLING PRACTICES

4.1 Members shall not use any unethical means to sell, market or induce any investor to buy

their products and schemes

8.0     UNFAIR COMPETITION

Members shall not make any statement or become privy to any act, practice or competition,

which is likely to be harmful to the interests of other Members or is likely to place other

Members in a disadvantageous position in relation to a market player or investors, while

competing for investible funds

AMFI GUIDELINES AND NORMS FOR THE INTERMEDIARIES (AGNI)

3.14  Intermediaries shall not rebate commission back to investors and avoid attracting clients through temptation of rebate/gifts etc.,

3.15  A focus on financial planning and advisory services ensures correct selling, and also reduces the trend towards investors asking for passback of commission

K. Ramesh Bhat 

CERTIFIED FINANCIAL PLANNER^CM

Pay us, don’t bribe us: Full Disclosure of Commissions Making your Mutual Fund Transactions work for you.... Dear Subscriber As the recent scandals prove, corruption is all around us. A silent nod, a signature on a file, promises of a plot of land, spectrum being doled out for cash, bribing bank and insurance company officials to get loans....the list is endless. The less known fact about corruption is that a lot of it emanates from the financial services industry. After all, money is the raw material and the end product of a financial transaction. And money is the root of all evil. As you know, till August 1, 2009 entry loads were a common feature of mutual funds. Every rupee that you invested in the mutual funds (except for a few types of schemes), led to an upfront payout of 1% to 3% (and upto 6% in some cases) to your distributor, broker, or to your friendly neighbourhood bank. So, if you were investing Rs. 1 lac in mutual funds, you could have ended up paying Rs. 6,000 in commissions to your bank or distributor. Only Rs 94,000 actually made it on your behalf into the stock market. And this is not it. There were trail commissions. So, if you continued to be invested in a particular fund then, after completion of every year, the distributor would earn another 0.5% to 1% of trail commissions on the current value of your investment. So, assume that in one year the Rs. 1 lac grew up to Rs. 1.1 lac, then the trail commission on this amount could be upto Rs. 1,100. And this comes in every year. Add the required zeros based on your past investments and you will be able to figure out the commissions that have been paid out. There is nothing wrong with earning commissions - we all need revenues to pay for our costs. But, with many distribution channels on a commission-earning spree, the interests of the investors were compromised. How do you know whether your distributor recommended a fund for you because it was good for you - or recommended a fund because the fund house was willing to pay high commissions on the sale of that fund? Yes, dear investor, the commissions being paid out by mutual funds to distributors probably led to situations where the distributors actually served the interest of the mutual fund house instead of the investor. The era of the investor being taken for granted and in the wake of making huge commission amounts, mis-selling, and active and expensive churning became an order of the day. This caught the regulator’s attention. On August 1, 2009 SEBI killed the concept of the "entry load". The regulator wanted the distributor, bank, broker to be paid by the investor directly. When you buy a share of say, ACC, in the stock market, your broker charges you a separate and known commission for the purchase of that share. ACC does not pay the broker any extra money for suggesting that you buy their share. Your cost of the transaction is known and transparent. But, when you bought a unit of a mutual fund, you had no idea of all the money (and cars, free holidays, and suit lengths) changing hands. SEBI wants the distributors to collect their commissions directly from the investors - this will allow every investor to judge whether the advice and service they receive from the distributor is worth the money they have paid as commissions. As you can imagine, there was huge uproar in the mutual fund industry protesting SEBI’s push for greater transparency and accountability. The free gravy train was threatened of being de-railed. Many distributors, lured by higher commissions from ULIPs stopped selling lower commission mutual funds and are still busy lobbying for the removal of the entry-load ban. They plant stories in the press about how the mutual funds are still reeling under the effect of this action. However, mutual funds have innovatively come out with ways to compensate the distributor, broker and banker to get business for them. Even though entry loads have been banned by SEBI, mutual fund houses still pay a upfront commission to your distributors, banker, broker. This can typically range from 0.25% to 1% and more in some cases depending upon the total business being brought to the mutual fund. And the trail commissions still continue. So, as an investor, you do not know the exact amount that has been given out to your distributor, broker or bank. The doubt still remains: is your distributor selling you a mutual fund based on what is good for you - or what is good for his commission structure? WHAT IS THE PURPOSE OF THESE COMMISSIONS? The question here is not the money. More important is the question of whether you got the appropriate service or advice against the same. Some distributors provide just basic investment advice and transactions for the commissions that accrues to them. Some other distributors, charge an extra fee for the investments. Typically, 0.5% to 1% over and above what the mutual fund is already paying. PersonalFN’s take on this is different. We have always believed that commissions that are earned from you are the compensation for providing the transactions support and well researched advice and investment services. This opaque environment of unknown commissions for unknown reasons was terrible for a company like PersonalFN. As you all know, our advice and recommendations on which mutual funds to buy - or not to buy - was a function of what was best for you. We never gave any advice based on the distribution commissions being offered to us. But the problem was that we did not get fees from you; our revenue stream came from the mutual fund houses. And still does. We don’t like that. We believe that we give you a service - and you should pay for it. Having said that,we recognize that the mutual fund industry still pays commissions to us. But this is from your money, so we have a simple formula. Payment from you for the Transaction Service* 0.5% per annum of your assets with us Less: Payments received from Mutual Funds as commissions Total Net money to be received from you, or if the commissions we received are more that what was due from you, then we "owe" you some services. *Please refer our Services Guide for the details about the service You can now take any service from PersonalFN (online research or personalized planning) against the excess commission earnings that we have had from your transactions. How this works? For example, if you have purchased Rs 5 lacs of mutual funds from PersonalFN, we believe we should be paid 0.5% per annum as our fee. This translates to Rs 2,500. However, if we have earned Rs. 2,800 as commissions from you in any financial year, this means that we "owe" you Rs 300. You can use this credit of Rs 300 to subscribe to any of our other Services. For example, Rs 300 will allow you to get a free one-month subscription of FundSelect, our premium mutual fund research product, without paying any additional amount. Or, if the value of your mutual fund portfolio with us is Rs 50 lacs and, based on our 0.5% per annum fee, we should have earned Rs 25,000 from you but received Rs 35,000 as commissions from the mutual fund houses, therefore we "owe" you Rs. 10,000. You can use this credit of Rs 10,000 to sign up for the Gold PersonalFN service which costs Rs 20,000 per annum. This means you pay just Rs. 10,000 more to get a full year investment review service along with the resources of a dedicated investment consultant. Hence, you enjoy PersonalFN research and services by allowing the fees paid by someone else (in this case the mutual fund) on your money to help pay for it. AND your transactions currently become absolutely FREE. Isn’t that great! To implement this, PersonalFN has introduced a report to all its investors which will do a FULL DISCLOSURE on all the commissions earned by us from your investments. The "Commission Earning Report" has now been made available as a part of the Portfolio Tracker feature, where clients track their investments done through PersonalFN. The report will show all the commissions earned by PersonalFN during a period either through Upfront or Trail commissions on the amount that has been invested in mutual funds by an investor through PersonalFN. Keeping in sync with our philosophy, we intend to use this disclosure to enable you to take our services in an absolutely simple and transparent way. To summarise, this will achieve three objectives for you the investor: You will now know exactly what PersonalFN has earned (to the last paisa) out of your transactions. You will be able to transparently subscribe to the premium services from PersonalFN against that earning. Getting full credit from money paid by the mutual fund industry to us based on your investments. You will have ZERO transaction cost (since the Mutual Fund commissions that we receive are funding that cost for you). As you realize, transparency is the key link in all the above. So, make the most from your mutual fund transactions and get your service from PersonalFN today. To know more about PersonalFN services, log onto www.personalfn.com or write to us at info@personalfn.com or better call us at: Mumbai (including Suburbs, Navi Mumbai and Pune): +91 22 6136 1221/22. Chennai (including Bangalore): +91 44 6526 2621/22. Download the PersonalFN Services Guide Click here. Best Regards Team PersonalFN Disclosure: Quantum Information Services P Ltd (PersonalFN) is a research and financial planning company and also helps clients invest in mutual funds, through its ARN-1022, based on their asset allocation. PersonalFN provides independent, unbiased advice. It also receives commissions on the investments that are done through PersonalFN. However, we disclose all the commissions to uphold our independence and unbiased approach.

Three Funds Hit the Jackpot With a Variety of Bets

By TIM GRAY

Published: January 8, 2011

FEAR dominated many headlines in the fourth quarter, as unemployment in the United States, a debt crisis in Europe and inflation in China nagged at investors. But hope for an economic resurgence bubbled up, too, and a variety of market sectors had positive returns.

For More Details Click the link below:  

http://www.nytimes.com/2011/01/09/business/mutfund/09topp.html?_r=1&src=busln

Please Update - Apart from MF Business what all you do.

These details will help us when some of our IFA Friends require any help if they need to do business in your city (in your code) 

Equity mkt to be more volatile in 2011 than 2010: ICICI Pru - CNBC-TV18 -

Equity mkt to be more volatile in 2011 than 2010: ICICI Pru - CNBC-TV18 -: "Equity mkt to be more volatile in 2011 than 2010: ICICI Pru"

The Best-Performing Investments of 2010 .

By SHEFALI ANAND

Source: http://online.wsj.com/article/SB10001424052748703909904576052793218751106.html?mod=googlenews_wsj

And the winner is: silver.

With a 66% return for investors this year in India, silver has outperformed most asset classes in 2010.

AFP/Getty Images

A jeweller displays a replica of an Indian 500 rupee currency note made from 10 grams of pure silver.

 

But that doesn't mean you should rush to buy silver coins in the New Year. If anything, the recent steep gains should be cause for skepticism about the potential for further profits.

"Maybe the story is already over, we don't know," says Narendra Kondajji, director of Procyon Financial Planners Pvt. Ltd. in Bangalore.

Besides, Mr. Kondajji says that like other precious metals silver can be hard to sell on short notice, so risk-averse investors should limit their exposure to commodities. "For a common investor, the major option to create wealth is investing in equities," says Mr. Kondajji.

Here's a look at how some popular investments fared in 2010:

Stock Indexes: 16% to 17%

If you had invested in an index of India's leading stocks at the beginning of the year, you would have earned a return of 16% or 17%.

The UTI Master Index Fund, which invests in the 30 stocks that comprise the Bombay Stock Exchange's Sensitive Index or Sensex, was up 16% through Wednesday.

If you had bought the Benchmark Nifty BeES, an exchange-traded fund which tracks the returns of the S&P CNX Nifty Index, you would have earned 16.6%.

Stock Mutual Funds: 14.4%

Most individual investors prefer to buy one of those funds in which money managers attempt to beat the Sensex of Nifty or some other index. How have these done?

The average mutual fund which invests in stocks of large Indian companies was up 14.4% through Monday, according to data from research firm Morningstar India Pvt. Ltd. Of course, this means that some mutual funds did very well, while others did poorly.

One of the best-performing funds in Morningstar's large cap stock fund category was the HDFC Equity fund, which gained 27% in 2010. One of the worst-performing in the year was the Reliance Equity fund, which lost 1.3%.

A spokesman for the fund's money manager, Reliance Capital Asset Management Ltd., declined comment.

Balanced Mutual Funds: 6% to 12%

These are mutual funds which invest in both stocks and bonds. These funds are meant for risk-averse investors because bond prices don't swing as sharply as stock prices. On the other hand, lower risk means that these funds provide lower returns than pure stock funds.

A typical balanced fund which invests around two thirds of its money in stocks and one third in bonds, gained 12% this year, according to Morningstar. Meanwhile, funds which invest only up to 25% in stocks and the rest in bonds were up on average 6%. These funds are often called "Monthly Income Plans."

Bond Mutual Funds: 4% to 5%

Mutual funds which invest in short-term bonds gained an average of 4.5% this year. Medium-term bond funds, which often have the word "income" in their name, gained 5.1%.

Bond funds are used by investors as a substitute for bank fixed deposits, partly because returns on them are not subject to income tax whereas interest on fixed deposits is taxable. However, these funds are more volatile than fixed deposits.

Bank Fixed Deposits: 6.5% to 7%

At the beginning of 2010, one-year fixed deposits typically paid 6.5%. As interest rates have gone up lately, returns in 2011 will be higher. A one-year fixed deposit from ICICI Bank currently pays 7.75%, while the same from Bank of Baroda pays 8%.

Gold: 20%

A gold bar of 99.9% purity gained 23% through Tuesday, according to the Bombay Bullion Association. However, this return doesn't reflect the cost of buying, storing and selling the gold bar.

View Slideshow

Sajjad Hussain/AFP/Getty Images

A goldsmith worked on a piece of jewelry at a workshop in Srinagar, India, Oct. 15.

To avoid the hassle of safe-keeping etc., investors have lately been buying gold ETFs. These trade on a stock exchange like a stock, and are held in an electronic account in the investor's name. The ETF-provider buys physical gold proportionate to your investment and keeps it in a bank vault.
Benchmark's Gold BeEs ETF gained 19.6% for the year through Tuesday.

Prithviraj Kothari, president of the Bombay Bullion Association, expects gold prices to remain strong in 2011, but adds that an increase in interest rates in the U.S. could affect the demand for gold.

Silver: 66%

Silver prices in India rose 66% this year on the back of huge demand from global investors looking to make quick money on commodities. Prices have risen despite oversupply and poor industrial demand.
Barclays Capital expects that given the excess supply of silver, prices could be curbed in 2011. So, this might not be the best time to load up on it.

Mr. Kondajji, the financial planner, notes that for individual investors in India, this is a hard asset to buy because it's not available in an ETF format. He advises clients to "not go beyond 10%" for their overall allocation to commodities, including gold and silver.

Real estate: 5% to 30%

It's tough to measure the performance of real estate because prices vary by cities and neighborhoods.
Still, here's an estimate of how residential real estate prices have moved this year in three major Indian cities.
The smallest returns came in Bangalore, where apartment prices gained 5% to 10%, according to Gulam Zia, national director for research and advisory services at Knight Frank India Pvt. Ltd., a real estate consulting firm.

In Delhi, Mr. Zia estimates that prices went up between 10% and 20% but for some luxury apartments they gained as much as 25%.

Mumbai was the best-performer, with gains of 20% to 30% this year. However, Mr. Zia adds that toward the end of the year sales volumes of new apartments dropped and he expects prices to drop as much as 10% to 20% in the first few months of 2011.

"Buyers in Mumbai should wait for the next quarter or two," says Mr. Zia. He expects some decline in Delhi prices as well.

Given the large amounts of money required to buy real estate, and the lack of liquidity, only the very rich should consider dabbling in this for investment.

Write to Shefali Anand at shefali.anand@wsj.com

Tough year for Mutual Funds

Chandan Kishore Kant / Mumbai December 31, 2010, 0:36 IST

Source: http://www.business-standard.com/india/news/tough-year-for-mutual-funds/420164/

Still adjusting to entry load ban; niche segmentation a new and growing trend.




The year 2010 was tough for domestic mutual funds. Fund houses struggled to get some relief from the continuous outflow but in vain. However, they’re optimistic, given the huge untapped market.



Though there were no major regulatory changes, the industry continued to be hit by the market regulator’s step over a year earlier, of banning entry load for MF equity schemes. Experts had anticipated the changes would be assimilated and the market would return to normalcy in four to six months. However, even after over five quarters of the new regime, fund houses continued to find it hard to address the issue and add assets.




Data with the Securities and Exchange Board of India show the average assets under management (AAUM) was Rs 6,73,186 crore on November 30. This is a decline of over 15 per cent when compared with the AAUM as on December 2009.



Equity schemes were the most hit. It was a year of redemption for them. There was inflow of fresh money, too, but investors in the boom before the market crashed chose to book profits and move out.



The change during the year was substantial reduction in New Fund Offers (NFOs). During the boom period in 2007-08, the industry came up with 55 NFOs, which garnered about Rs 43,000 crore. This year, the number dipped to 16, which could manage to collect a mere Rs 2,738 crore



Fund players said though this year’s markets were at almost the same level as in 2008, the sales of equity MFs could not keep pace. “During that time, NFOs helped the industry garner a much greater sum. On Thursday, NFOs are no more in fashion, as they are incapable of raising funds,” said the chief investment officer of a top fund house.



CEOs admit intense competition but add there is huge scope, as the larger part of the potential market has not been touched or is under-penetrated. After the top eight cities, the other tier-I & tier-II cities are now on the radar of fund houses.



Smaller fund houses and entrants in the market are positioning themselves as niche players. Instead of venturing into all the asset classes, they are specialising in segments, seeing the market getting crowed with seasonal products.



“Transparency, simple but strong and different products, and value addition for investors are the strategies which fund houses are concentrating on,” said the executive vice president of a large distribution & broking firm.



Foreign-based firms having presence in India are in the process of bringing their global products. “Fund houses are more and more investor-focused and take measures to keep investors comfortable by not confusing them,” he adds.