ET went shopping for the right mutual fund(s). It caught up with a relationship manager of a leading private-sector bank. One look, a couple of background questions and the manager knew he had found his target clients.
The three musketeers — two of us along with our secret lethal weapon, the hidden camera — went shopping for the right mutual fund(s). We caught up with a relationship manager of a leading private-sector bank. One look, a couple of background questions and the manager knew he had found his target clients.
“So how much money are you looking to invest?” We thought for a few seconds and replied hesitantly, “About Rs 50,000-60,000.” He fired his next question, “So what have your earlier investments been?” We said we had some vague idea about a life insurance policy taken by our parents.
His targets had all that he wished for— wad of ready cash, eagerness to invest and had little clue about investment avenues.
We said we were looking to park our money in mutual funds. Did we say mutual funds? Well, we were presented with a fund, which, in every sense, was a “fund”. Our relationship manager-cum-investment-adviser-cum-financial planner started off the power-packed 20-minute conversation giving details of the fund and how it could weather all market conditions.
The fund he was selling was surely tempting enough. “Since inception it had given returns of 18%,” he said.
Fifteen minutes into the conversation and we were told everything the manager thought necessary for us to know. Rather, almost everything.
We thought we were finally lucky to get the right advice. Just as we were smiling at this thought, came his next statement: “You have to pay for only five years.” And this despite we clearly mentioning that we were looking to invest for only two to three years. A number of questions ran through our minds. No mutual fund had a five-year lock-in, after all!
What I was told What is wrong
Ulips are a type of mutual fund or just like a mutual fund Unit-linked insurance plans require a longer time horizon than MFs. The charges for investing in both are also different.
Invest in a mutual fund for a year and divert this money to pay the premium for Ulip Horizon for equity mutual funds should ideally be at least three years
Investing in MFs is not a great idea as markets are going down now It is an ideal time to start investing when markets are going down, as you get more units and there is scope for growth
You have to pay only for five years Five years is not the apt horizon for Ulips. It should be minimum of 10 years
In Ulips you are getting investment plus insurance Never mix investment and insurance
He comfortably borrowed words from the mutual fund glossary to explain the fund without naming it. Words like SIP, NAV, fund, etc were thrown into the conversation to camouflage the product in the name of an MF. And then came the final nail in the coffin. “It’s a type of mutual fund or you know just like a mutual fund,” he explained.
And to think that our insurance and market regulators Insurance Regulatory and Development Authority and Securities and Exchange Bureau of India were battlling all this while over the classification of this financial product!
But, since we were eager to find out the name of the product, we kept questioning as innocent investors. Which mutual fund was this, we finally asked, to which he reluctantly explained that the company had two businesses — one was the mutual fund and the other life insurance.
Everything possible was done to create chaos in the consumers’ minds. After 17 minutes the product was finally unveiled. And Ulip it was! No doubt he was hell bent on not using the dreaded four-letter word, until the very end of the conversation
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