Insurance agencies are providing incentives to IFAs to get your contact details—everything from emails to cell phone numbers
You trust them with your money, you have faith in them as they will guide you to the right financial path, you believe in them as they are completely independent and loyal to their clients. These of course are your independent financial advisors (IFAs). However, we now learn that some of these IFAs are being wooed by insurance companies to part with your contact details.
Companies like Reliance, HDFC Life Insurance, SBI Life Insurance, Aviva Life insurance, Birla Sun Life Insurance and other insurance majors are understood to be inducing IFAs with incentives to get contact details of clients. These are either meant to locate new customers for unit-linked insurance plans (ULIPs) or, simply to poach customers from other insurers.
An IFA gets paid for his co-operation in providing other details of a competitor’s clients to an insurance company. All your details, right from your telephone numbers to email IDs, even residential addresses, are also provided to the insurance company.
This is all part of a desperate attempt by insurance companies to keep selling ULIPs after a very public brawl between the Securities and Exchange Board of India (SEBI) and the Insurance Regulatory and Development Authority (IRDA) brought ULIPs sales down to a trickle. Thanks to that imbroglio, many ULIP customers are worried about their investments and are having second thoughts of continuing with premium payments for a product plagued by high default rates. Insurers are trying to reach out to existing and potential customers to dispel doubts and fears.
Secondly, insurance companies need to find other ways to bring in new customers. It is not clear whether they can launch new ULIP products before the courts pick the winner of the SEBI-IRDA fight; so they have to sell more to their existing customer base and need to interact with them directly. Or they have to incentivise IFAs to lure investors from other insurance companies.
“Insurance companies have often come to us to either sell their ULIPs or ask for our contact list in order to create a greater database to sell them directly to the clients,” said a certified financial planner who wished to remain anonymous. He calls this “a routine affair.”
These deals are obviously not done transparently. “There is no paper trail or a black-and-white agreement,” says Neeraj Bahal, a certified financial planner (CFP), from Fasttrack Investments. Usually, an executive from an insurance company would meet an IFA and tell him about a chance for him to make some money by parting with his clients’ details for a fee. Depending on the deal, the IFA will either part with the data which the insurer uses to contact a potential customer; or, in some cases, the insurance executive will actually accompany the IFA to client meetings to sell a product. This enhances the credibility of the insurance product being sold.
We learn that many IFAs who sold mutual fund products are tempted by the kickbacks from insurance companies after their business was hit by SEBI's ban on entry loads. "Since mutual fund commissions were dwindling and distributors were affected, it created an opportunity for the sales of ULIPs,” said Harish Mohan, managing director, Time Financials (Chennai).
Some distributors have a different perspective. Jayant Vidwans, president of the Society of Financial Planners said, "Sharing of data with various organisations is not wrong.”
Not all IFAs are jumping in to grab the money. “If he is a serious advisor then he shouldn’t be selling his clients’ details. He shouldn’t do that as this is his bread and butter,” says Sumeet Vaid, founder and managing director, Freedom Financial Planners.
The function of an IFA is to provide the best possible financial option for his clients. However, when an IFA’s conduct is influenced by incentives, he becomes just like any other insurance agent and clients’ interests are compromised.
As we predicted, a fresh downturn may have started
The market recovered from its early low, taking a cue from European markets. The Sensex ended at 16,835, lower by 159 points (1%) while the Nifty shut at 5,060, down by 33 points (0.6%). Bourses plunged sharply in the early morning session on the back of weak Asian markets. The market traded range-bound till mid-morning when it touched an intraday low of 16,551. It staged a solid recovery in the afternoon session paring most of the early session’s loss.
Asian markets were down on Monday on concerns over the economic recovery of the eurozone and weak US earnings data, dampening investors’ appetite for risk. Key benchmark indices in China, Hong Kong, Japan, Indonesia, South Korea, Singapore and Taiwan fell by 0.77% to 5.07%.
US stocks were down on Friday (14th May) on weak earnings from retailers, Senate backing for limits on credit card fees and concerns over the sustainability of European public debt. The Dow was down 163 points (1.5%) to end at 10,620. The S&P 500 was down 21.76 points (1.8%) to 1,135.6. The Nasdaq was down 47.5 points (1.9%) to close at 2,347.
The World Trade Organisation (WTO) said that the Doha Trade talks should be pushed forward to help countries emerge from the global economic crisis. The International Monetary Fund (IMF) said that some countries should control their expenditure; however, large economies can wait till 2011.
Gold prices are on a rise as investors, worried by the debt crisis in the eurozone, are taking refuge in the yellow metal. Purchase of gold-backed exchange traded funds has sent the yellow metal to a record high near $1,250 an ounce this month.
Back home, Foreign Institutional Investors (FIIs) were net sellers on Friday, offloading stocks worth Rs381 crore. Domestic Institutional Investors (DIIs) were net buyers of Rs164 crore. The rupee was down on the weak equity market and strengthening of the dollar against the euro.
Larsen & Toubro (L&T) (up 5%) has posted growth of 28% and 31% in sales and operating profit in the March quarter over the year-ago period. At the end of the March quarter its order book stood at Rs1 trillion. The board has recommended a dividend of Rs12.50 per share (in the previous year, it was Rs10.50 per share).
Reliance Industries (RIL) (down 2.6%) and SIBUR, Russia’s leading petrochemical company, have signed a memorandum of understanding (MoU) to set up a joint venture in India. This new joint venture will produce butyl rubber at RIL’s integrated petrochemical site at Jamnagar in Gujarat. As per the agreement, SIBUR will provide proprietary technology for butyl rubber polymerisation and its finishing while RIL will supply monomers and provide the JV with world-class infrastructure and utilities.
McNally Bharat Engineering Company (down 4%) has received orders for design, supply, erection and commissioning for a power project in Tripura for a total value of Rs9.91 crore. The scheduled time for completion of this project is 17 months. The second order is for another power project in Tripura for Rs17.27 crore. The scheduled time for completion is 18 months.
KSK Energy Ventures (up 2.4%) has announced the commencement of power generation from the first 135MW unit (out of four such units of 135MW each) of its 540MW coal-fired project in Maharashtra.
Only 15% of India's defence equipment can be described as state-of-the-art and nearly 50% is suffering obsolescence, according to the Department of Industrial Policy and Promotion
The industry ministry today proposed foreign direct investment (FDI) up to 74% in the defence sector from the present 26%, stating urgent upgrade of equipment in the armed forces was needed as a bulk of them suffered from obsolescence, reports PTI.
The Department of Industrial Policy and Promotion (DIPP), however, said the hike in FDI need not mean any commitment on procuring from companies, which have set up the facilities in India.
"There need not be any commitment on procurement and these players will have to participate in the request for proposal (RFP) to technically qualify and also compete in the financial bid," DIPP said in a discussion paper.
It has sought views of different stakeholders till 31st July this year.
"Only 15% of India's defence equipment can be described as state-of-the-art and nearly 50% is suffering obsolescence...there is, therefore, an urgent need to enhance the deterrent and the operational capabilities of the armed forces...," the DIPP added
Since the entire issue has been placed in the public domain, the DIPP clarified that the suggested policy should not be construed as the firm views of the government.