Part Time Advisers-Effect on your Investments

Previous week I came across two of my new clients portfolio for revision. They invested heavily in the products called Equity Mutual Funds and ULIPs. Both the investments are on the advise given by close adviser of them. But when you look at the current situation of portfolios they look pathetic in terms of returns. When I told the same about under performance of their portfolio and why the review not done, their first reaction is “adviser not in contact”.

Now let us look at the changes happened in Mutual Fund and ULIPs segment over the few years. Before existence of entry load, you might have found lot of advisers who are recommending you the best products on earth (according to them at that time) called Equity Mutual Funds and ELSS. They might have showed you the returns what funds generated. Even if I am in my those two clients  position, I might have did the same thing what they did-INVESTING. But after the abolition of entry load, lot of advisers left the Mutual Fund industry as they did not find it lucrative to continue the business.

Effect- 1) Those advisers might have registered the SIPs for longer tenure like 10 yrs to 15 yrs and you may be still continuing those SIPs without knowing what to do.

2) Funds which they showed as the best performing funds may be under performing now.

So overall effect on your investment looks negative in major cases (Especially ELSS). Reason is, portfolio review which is a must thing for any investment not done on regular basis.

Now let us look at the products called ULIPs. These products were sold few years back as hot cakes to investors. Advisers (especially private insurance) told these products are panacea for all your financial and insurance needs. But once regulatory effect came into effect relating to advisers commission structure and overall expenses, suddenly for few advisers these products became non lucrative in terms of their earning. For ULIPs, I am not blaming the advisers non-revision as sole reason for under performance. Because costs of ULIPs and how that particular product did over the period too effects. But atleast he might have saved his clients to the some extent.

Effect-1)They never look back to the clients whom they sold these products and never recommended any switch over to funds also. Atleast by process of switch over they might have protected the investors money.

2) You may be still paying the premiums for those ULIPs in the confusion of what to do.

So overall the effect on your investment is heavy but you cant blame none. Because adviser who sold you might left the industry already in search of any other profession which is lucrative than mutual fund and ULIPs (Now they may be selling you traditional plans instead of ULIPs !!!). Hence the important message I want to give to investors is “When you are choosing the products for your investments take the same caution towards your advisers profile too as you are taking towards the products you are investing“. Happy Investing !!!