Nupur Anand and Amit Shanbaug went shopping for a mutual fund. The bank relationship manager offered them a Ulip under the garb of a fund
The three musketeers—two of us along with our secret lethal weapon, the hidden camera— went shopping for mutual fund(s). We met a relationship manager of a leading private sector bank. One look, a couple of background queries 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 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— a wad of ready cash, eagerness to invest and 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 dishing out details of the fund and how it could weather all market conditions. The fund he was selling was tempting. "Since inception, it has given returns of 18%," he said.
Fifteen minutes into the conversation and we were told everything the manager thought was necessary for us to know. Well, 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 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!
He easily 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 battling all this while over the classification of this financial product!
But since we were eager to find out the name of the product, we continued to question him as innocent investors. Which mutual fund was this, we finally asked, to which he reluctantly explained that the company had two businesses — one, 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! Of course, there was no missing his efforts to delay using the dreaded four-letter word until the very end of the conversation. He had mistaken his target customers for ignorant investment seekers. We had made it amply clear to the relationship manager at different stages of our conversation and in various ways that we were interested in parking our money in mutual funds. That apart, the roadblock of a five-year lock-in, recently introduced in Ulips, was tackled most deftly. Our predicament was that we had about 60,000 at the moment and the plan required a five-year investment. One of us shot a hapless look and confided, "I may get married in a year or two and am not sure if I'll have the money in the coming years." In no time, he donned the hat of a financial planner. Using a flow chart, he explained how one should not be putting the entire money in one go. According to him, the trick was to break up the investments into three categories. "Put one-third of the amount in the 'fund' aka Ulip at present. Break the balance amount and invest part of it in a fixed deposit and the rest of it in a mutual fund. The amount invested in the fixed deposit will take care of the second installment for the plan; for the third year, you can divert the money that you'd invested in MF and that can take care of the third installment." What an idea! Then came a list of mutual funds we should invest in, to pay towards the premium for the third year (of the Ulip), completely disregarding our original investment plan. No prizes for guessing the SIPs he recommended—the ones floated by the bank's very mutual fund subsidiary. That left us confused. Only minutes ago, he had said investing in mutual funds was not a great idea as markets were dropping. And now he was advising us to invest in one, to take care of the third installment for a Ulip. The relationship manager glibly devised ways to channel funds to this account. He offered solutions to avoid a default in the first three years. But wait, didn't he just say that the lock-in period was five years? What happens in the last two years? How do we pay the installments? No answers there. Soon, he was reeling out freebies that we would get along with the Ulip. Those were missing, he said, in the case of mutual funds. "Here you have tax benefit as well. Also, you have insurance and investment." Indeed, the relationship manger would have made Gekko proud. As for us, we were still trying to get a grip on the investment plan as we exited the bank.
