You may soon be allowed to change your mutual fund agent if you feel he is not giving you proper advice or telling you how your investments are performing. And, for this, you won’t need his consent any more.
The Association of Mutual Funds of India (Amfi), the trade lobby of mutual funds, had asked its members to do away with the requirement of a no-objection certificate (NOC) from the existing agent for an investor to switch to a new agent. The association felt that agents would invariably refuse or delay issuing such a certificate as it meant they would lose out on the trail (ongoing or regular) commission they earned on your investment.
Amfi’s idea was to give freedom to investors in switching from a non-performing agent to a better one. According to its guidelines, an investor could write to his mutual fund company, requesting it to change the agent, quoting the registration code of the existing agent and the new one. After this, the old agent would stop receiving the commission, ranging from 0.4% to 0.5% of the prevailing value of the investment (besides this trail commission, agents also get an upfront commission of 2-2.5% of the amount invested as an entry load at the time their clients make the initial investment).
However, many fund companies still insist on the NOC. If a fund doesn’t get the NOC, it will still make the changes in the broker code and stop paying the trail commission to the previous as well as new brokers. Meanwhile, the investor will remain stuck with the previous broker.
“The new guidelines, if implemented properly, can force individual agents to provide better services and help investors in differentiating between agents who merely sell and those who give advice,” said Paul D’Souza, proprietor of Cuzinns Investment Services, a Mumbai-based investment advisory firm.
However, it appears that it will take some time before all mutual funds accept the guidelines. They will also have to face their large distributors, who mobilize money for mutual fund companies.
Acknowledging that mutual fund companies are not following the guidelines in spirit, Amfi chairman A.P. Kurian said, “We are in talks with the mutual fund companies to bring about uniformity in this practice.”
Until this happens, you can bypass the non-performing agent if you want to make investments in a new scheme. Walk into the fund company’s office and you will end up saving 2-2.25% entry load, as direct investments do not attract any load. But, you will need to keep track of the investment and account statement on your own.
IPO report card since 2005
Are you among those who invest in initial public offerings (IPOs) of companies? Here is a set of data which can perhaps bring down your enthusiasm for IPOs. Since 2005, four out of every nine companies, which raised money through IPOs or follow-on offerings, are trading below the issue price.
The data compares the price at which shares were allotted and the market price as on 7 March. The biggest loser is Nandan Exim Ltd, which raised money at Rs20 a share in June 2005. At the current price of Rs 3, IPO investors have lost 85% of their investments in this company. Others, such as Uttam Sugar Mills Ltd, Celebrity Fashions Ltd, Broadcast Initiatives Ltd, SPL Industries Ltd and Raj Rayon Ltd, are trading 75-80% lower than their issue prices. The list also includes big companies, which raised a substantial amount from investors. For instance, Reliance Power Ltd, which concluded its IPO in January, traded at a 25% discount to its issue price of Rs 450.
There are 69 companies, or 23% of those which raised money during the period, that have more than doubled the investments. Educomp Solutions Ltd has given a 2,607% return to investors. This means, an investment of Rs10,000 in the company at the IPO price of Rs125 in January 2006 has grown to more than Rs2.5 lakh in a little over two years at its stock price of Rs3,383 on 7 March. India Infoline Ltd is the second largest gainer. Since its IPO at Rs76 per share in May 2005, it has gained 993% and traded at Rs830 on 7 March. UTV Software Communication Ltd and Sadbhav Engineering Ltd are among the companies that have given more than 500% return to investors.