Industry body AMFI acknowledges rampant mis-selling of MF products; puts blame on distributors, ignoring the fact that poorly-performing products of AMCs, aggressively sold with all kinds of incentives, are really the cause of mis-selling
The newly-appointed chief executive of industry body Association of Mutual Funds in India (AMFI) is looking to hit the ground running. Within days of his appointment, he announced his intention to crack the whip on the blatant mis-selling of mutual fund products to retail investors. However, his ire has been misdirected towards distributors, largely ignoring the role played by asset management companies (AMCs) in pushing the distributors to sell products aggressively.
In a recent interview with Business Standard, HN Sinor, the new chief at AMFI, acknowledged that mis-selling runs rampant in the mutual fund industry and that small investors were being short-changed on a regular basis. Announcing that this situation needed to be addressed on a priority basis, he indicated that distributors engaged in mis-selling should be suspended from selling mutual fund products.
While it is heartening to see that the new chief of AMFI has taken up arms against mis-selling, it would be unfair to tie the noose around distributors’ necks. This is very simply because distributors don’t manufacture products. Neither are they responsible for shoddy performance of the majority of mutual fund schemes. If anything, it is the AMCs of mutual funds that are promoting mis-selling in a bid to generate more business. Distributors are merely being lured into the high-stakes game being played by such AMCs.
Moneylife has previously written (see here) about how large AMCs are wooing distributors to sell their products more aggressively by organising lavish junkets for those who meet their business targets. It is this aggression that may lead to mis-selling. Indeed, has anybody ever come across any mutual fund company pulling up any distributor for mis-selling?
An independent financial advisor (IFA) who spoke to Moneylife on the condition of anonymity said, “The regulator gives a verbal indication of what the AMCs should pay to distributors but none of the AMCs follow that. AMCs are forced to lure distributors with upfront brokerage as high as 4% because of the changed rules of the game. After the new rule that payment of trail commission will go to the new distributor, competition for assets under management (AUM) shopping has become very intense. No distributor is certain of the trail commission coming to them. They want to earn future trail commissions upfront. It means there is no obligation or attraction for them to serve investors after the allotment. The new broker will also not service investors because he won’t get any trail commission which is already paid upfront.”
The irony is that if there is any segment of distributor that indulges in mis-selling it is the industry where Mr Sinor has worked for decades—the banking industry. “Banks mis-sell products involving large sums of money under false representation. They rely least on the strength of the product and requirement of investors. They are constantly abusing their trusted relationship with depositors. There is a need to regulate AMCs and bank distributors more,” he added.
Small distributors are also feeling the heat after the no-entry load ban imposed by SEBI last year. In such a scenario, they are under pressure from the large distributors who are leaving no stone unturned to grab their business from under their nose. In the race to fight for their very survival, small distributors are not thinking twice before selling fund schemes blindly to investors. It is time AMFI realised where the root cause of the problem lies. It has come under a lot of fire recently for being a toothless body with no concrete measures or actions for improving industry standards. It has largely done nothing significant to standardise any of the practices. Mutual fund prospectuses are a shame compared to the IPO prospectuses. If AMFI wants to bring about some positive changes, AMFI must look within. It has a lot in its plate to start with.
Domino's Pizza has said that within three years, its Indian operations would be among the top five global markets for the company
Quick service restaurant chain Domino's Pizza on Thursday said that within three years, its Indian operations would be among the top five global markets for the company, reports PTI.
"India currently is one of the fastest-growing markets for us and ranks among the top ten in our global list. Within the next three years, India will be among our top five markets," Domino's Pizza president and chief executive J Patrick Doyle told reporters in New Delhi.
Mr Doyle, global head of the chain, is on a visit to India. Today, he inaugurated the 300th outlet of the company in the country. The outlet in Delhi is also the 9,000th Domino's Pizza store globally.
"India currently contributes to around 1.5% to 2% of our annual global sales of $6 billion and we expect (a) substantial jump in it. Even during the economic recession, India was a growth story for us," Mr Doyle said.
With 65 new outlets this fiscal, he said, the company registered its biggest expansion in India among all its operations.
In India, the Domino's brand is operated by Bhartia Group-promoted Jubilant Foodworks under a master franchise agreement.
Although China has more billionaires than India, ten of Asia's top 25 are Indian
Mexican billionaire Carlos Slim has emerged as the richest person in the world with $53.50 billion in assets, while Indian industrialist Mukesh Ambani ranks fourth with $29 billion in the US magazine Forbes annual list of world's top billionaires, reports PTI.
Mr Slim is followed by William Gates III (popularly known as Bill Gates) with a net worth of $53 billion and Warren Buffet at the third spot with assets worth $47 billion.
Non-resident Indian (NRI) billionaire Lakshmi Mittal with a net worth of $28.70 billion ranks fifth while Mukesh's younger brother Anil Ambani is at the 36th spot with $13.70 billion.
There are 1,011 billionaires in the world now, up from 793 a year ago.
Mr Gates has held the top spot for 14 of the past 15 years in the past. "The Microsoft founder is now worth $53 billion, up $13 billion from a year ago," Forbes said.
There are just two Indians in the list of top 10 richest persons across the world.
The only woman to be on the top ten list, at number ten, is German entrepreneur Karl Albrecht, who founded the Aldi supermarkets and has a net worth of $23.50 billion.
The United States has 403 billionaires—the most in the world, followed by China that beat out Russia to grab the second spot. Although China has larger number of billionaires than India, ten of Asia's top 25 are Indian while China has one. Hong Kong and Japan each have five and China has one in Asia's top 25. New York has more billionaires than any other city.
The youngest billionaire who has a net worth of $4 billion is 25-year-old Mark Zuckerberg who created Facebook.
The list of Indian billionaires include Mukesh Ambani and LN Mittal in the top two along with Azim Premji ($17 billion), Anil Ambani ($13.70 billion), Shashi and Ravi Ruia ($13 billion), Savitri Jindal ($12.20 billion), Kushal Pal Singh ($9 billion), Kumar Birla ($7.90 billion), Sunil Mittal ($7.80 billion) and Anil Agarwal ($6.40 billion).