Mutual funds seem to have designed a process of redemption to ensure that money does not flow back or make redemption as difficult as possible for the child who turned major and for his parents
The mutual fund (MF) industry wants us to invest with them. Not a bad thing for us too. However, they have designed their processes that are frustrating, to say the least. They have been designed by people, who apparently have worked with the Government of India. If one form will do, they will make you fill five.
They come and solicit investments in the name of your minor children. Whilst opening the account, all you need is one simple form. However, once your children attain the legal age of ‘majority’, the processes are designed to screw your happiness. The typical requirement when your child becomes a major, are the following:
i) Copy of PAN Card;
ii) Copy of cheque leaf with his/her name as first named ;
iii) Proof of date of birth;
iv) And a fresh KYC form (they just ask you to produce a copy of the acknowledgement of the KYC submitted);
v) Bank account details of the minor turned major, with signature certified by the banker and a ‘specimen’ cheque leaf of that account.
vi) A mandate for change of bank account- Initially the bank account would be the guardian’s. Once major, the account must be of the minor.
In addition, I never got a communication from HDFC Mutual Fund, telling me of the implications as to when they become a major. Probably they never thought that I would hang around so long. They seem to have designed processes to ensure that money does not flow back or make redemption as difficult as possible.
Still, based on my splendid initiative, I distinctly recall that a couple of years ago, I submitted the fresh PAN data, and bank account number to the asset management company (AMC)’s office.
Now, my child wants to redeem. The registrar and transfer (R&T) agent sends a mail demanding the above. How delightful. I have to go through the whole bloody mess all over again.
While opening the account, they must have taken a date of birth on record, for the minor. All they have to do is to match it with a PAN card copy that I submit. And why does one have to self-attest the copy of the PAN card? They can simply check it online.
I had stopped investing in to the kids accounts, in the MF for over 10 years now. How do they expect me to keep a ‘copy’ of the acknowledgement of the KYC form?
The Association of Mutual Funds of India (AMFI) seems to have designed the harassment process in the certainty that some money will become forgotten, some guardian will die without the family knowing about the account or some such thing.
In the last few years, I have stopped receiving any physical account statements from the mutual fund. It is natural for AMFI to enrich the trade which it represents. And the Securities and Exchange Board of India (SEBI) is unfortunately ignorant of actual ground realities.
Of course, the fault is mine, for trusting someone like HDFC Mutual Fund. I should have been alert, gone and sat in their office on the 18th birthday of my children and completed the paperwork. And every month, kept checking online for the balance and NAV. Now I am not even sure that the investment record they give will be correct. Can’t blame them though. The investment world is designed to cheat the investor. It is another case of ‘caveat emptor’.
My son and my daughter put in their redemption requests almost on the same day, at Chennai and Mumbai respectively. My son went and met the banker as well as the AMC (located in the same building) and gave whatever they wanted. But the AMC did not acknowledge the redemption request. They said that the KYC has to be updated on the system and that it would take three working days and then the redemption request could be submitted. The Bank-broker did not help. I do not know why the three working days was sought. Nothing in the rule book, but the arrogance of HDFC Mutual Fund prevailed. Once three days were over, the form was submitted and the amount was credited after another three or four working days. From start to finish, it took about 10 days.
I was more confident about the outcome of my daughter’s redemption request because the account statement showed her as KYC compliant. She submitted the papers to CAMS, the R&T agent. They wanted some papers like bank account statement certified and PAN card copy. After about five days or so, I got a credit in MY account, on the morning of a particular day. Suddenly, in the evening, I get an SMS saying that the credit was reversed! I spoke to my distributor (the RM at HDFC Bank) who told me that I would get it next morning because it was T+3 and the date was only T+2. My calculations were different and I called up a helpline. One nice lady, Helen, told me that KYC was not proper. My daughter had to submit a ‘change of bank account’ mandate. I told her that my daughter had submitted everything that the person at the counter of CAMS wanted. But she was like a stuck tape-recorder and would not budge. I told her that my daughter had submitted an extract of her bank statement, certified by the bank officer, which had all the details of the bank account. This lady said nothing doing. Do it my way, if you want the money. In all this delay, unfortunately, the market was falling and I was losing NAV. No issues, since if the market was rising, I would have gained. The issue was one of NOT GETTING MY MONEY.
Finally, I took to Twitter. Sent a DM to the R&T. After a day or so, a nice gentleman from CAMS heard the full Mahabharat and ensured that the amount would be credited on that day itself. All I had to do was to submit a copy of a cheque leaf of my daughter’s bank account.
CAMS as R&T helped me out thanks to my social media outrage. They also suffer due to quality of personnel at different locations. However, this is no fault of theirs. India has standards of after-sales service bordering on the non-existent. And the industries just capitalise on it.
The biggest offenders in this episode are HDFC Bank- the brokers (distributors) who sold this mutual fund. Apart from up-front commissions, they have earned trail commission on everyday of my investment remaining with the mutual fund. When I needed help, they hardly bothered. In fact, as I was following the progress and sought their help, I got none.
It would be useful if SEBI mandates that an investor can write to the AMC and terminate the payment of brokerage to the distributor. It can pay the trail commission to anyone that the investor nominates. Today, there are no Service Level commitments provided by the mutual fund distributors, who earn commissions. Typically, the employees of the distributors have targets for new upfront commissions, so they happily ignore the service to old accounts. And when HDFC Bank keeps changing its Relationship Manager every other year, what are the chances of an investor getting any service at all, unless he is a mulch cow for the products being sold by the RM?
I do not know if AMFI will bother. I know that the fund house will not bother. I am the stray investor who has been careless about investment. Once I buy something, it is surely my bounden duty to ensure that I keep everything up to date, and read up the laws. The distributor and the fund house have done me a favour by accepting my investment.