The biggest beneficiary of the MF boom of course is Cox and Kings. Most fund houses are wining and dining in some part of the world, perhaps far removed from India. Foreign trips are a given, and an Indian trip is thrown in too.

When you talk to a fund house, they tell you that it is important to treat the sales team well because mutual funds are difficult to sell. However, when a product is difficult to sell what do you do?

Two options – a) spend money on training the sales force or b) reward them to a level of being addicted.

Talk to the advisors and they are busy adding pages to their passports. I am seriously not sure how the clients react to this, but I am sure that they are not going to be amused. At least not very amused.

Now when markets are up and rising and it is difficult to sell, a responsible market person has an important role to play. It is important to tell the clients that the current market is booming – and it can continue to do so – however, it makes sense to HAVE LOWER EXPECTATIONS. Instead a balanced scheme tells its sales force “we will pay 1% per month guaranteed’. So the sales force is now selling the product as a “1% per month guaranteed for 20 months”. Sadly this is a dumb thing to do, and not enough of the investors will know that a big portion of this must have come from their OWN NAV….and as the AUM size grows it will be far more difficult to handle. Is it a Ponzi scheme already or heading to be one? Wake up SEBI…when things are not so bad.

Now a sale is being made saying “see 12% guaranteed monthly pay out”. Clearly the salesman has removed the words “for 20 months”. This is no way to sell a mutual fund – and hello the bluest of blue fund houses are doing this.

Selling equity funds with a) high expectations and b) guaranteed returns is the surest way to disaster.

Look at the history of mutual funds and see how many investors have redeemed their funds at a discount to their purchase price. I am sure Valueresearch will have some data in this regard, but SURELY THE CEO of all the fund houses KNOW how many of their investors burnt their fingers. Markets will fluctuate of course, educating the investor to stay through a long boring grind is the job of the IFA and that of the Mutual fund industry. I am not saying anything about the regulator. The regulator of course knows its job, right?

At a time when the market is in a bull phase – see all IPOs are listing at a premium. Hudco, Cdsl,…etc and a bunch of SME IPOs, NFOs going through in a big way, selling mutual funds is NOT SO MUCH OF A PROBLEM. Amfi with its huge budger is on a “MF asan hai” campaign.

At this point in time if you push funds with wrong expectation, one day there will be pain.

Who will the fund industry and its illustrious regulator that you only choose the order in which you want pain and pleasure. If you choose pain, pleasure will follow.

The MF industry has chosen pleasure…..SURELY ….pain will follow….soon. Wake up SEBI.