What is not acceptable is the race to the bottom as is being advocated by AMFI, the mutual fund trade body, by allowing the mutual fund industry to also charge extortionate commissions - the existing 2-6% commission per annum, charges, loads and expenses are very generous by international standards.
In the Business Standard today, the new Chairman of the insurance regulator has asserted that the regulator would look after the interests of the customers and the industry - I hope it is strictly in that order.
PS. Prof. Somashekar (not the securities lawyer) of National Law School, Bangalore has done some interesting research on a slightly different topic of insurance investments in the capital markets - more on that later.
PPS. Since writing this piece I went to the extension branch of ICICI head branch of Delhi (near Jawaharlal Nehru Stadium) for a long pending complaint. As I entered, an insurance seller told me about a ULIP 'scheme' where I would make 35% returns. When I asked whether this 35% was in the present continuous, he immediately backtracked and said this was the past year's return. When I asked if there was a possibility of a 35% fall, he nodded his head. I smiled and told him that he was misselling the product. Here was a person, who was selling a clear mutual fund product (no reference to insurance), who was misselling by indicating future returns without indicating potential future losses by referrring to past returns, and was clearly well informed that he was misselling (he corrected himself on being prompted). If this kind of event happens in the head branch of ICICI, I dread to think of promises made in smaller towns by even less scrupulous distributors - and the consequences when the five year old bull run hiding the malpractices of such sellers recedes and people see huge losses sitting on their conservative 'insurance' investments.
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