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You Don’t Need Enemies When You Have Such A Financial Advisor

“I’m looking to invest in mutual funds. Can you help me do that?” I asked the lady who picked up my phone at Bluechip Corporate Investment Centre Ltd.

Bluechip is the financial services company that had advised my friend’s father to invest in over 50% of the 192 mutual fund schemes he held in his portfolio. I had written about this in yesterday’s post.

“Yes sir,” said the lady. “There’s this gold fund that you can invest in for very good returns.”

“Can you explain me more?”

“One minute sir, let me ask my financial advisor to talk to you. He will explain you everything.”

“Aren’t you the financial advisor since you were advising me the gold fund?” I asked.

“No sir. But one minute…” she said while handing the phone over to the advisor.

Getting a mutual fund recommendation from the receptionist or the telephone operator or whoever she was, was shocking.

Anyways, the advisor came on line and asked me why I’d called.

“I want to invest in some mutual funds. Can you suggest me some good funds and also how should I go about it?” I asked.

“Definitely sir! I’m here to help you out!” he replied.

“The way you helped that old man with so many mutual fund schemes in so many folios?” I muttered under my breath.

“See, I’m looking to invest in 5-6 mutual fund schemes of HDFC Mutual Fund,” I said, “Tell me one thing. Is it better to invest in them through one folio or 5-6 different folios?”

“5-6 different folios, sir.” I was expecting this reply from him.

“But I had heard somewhere,” I was testing him, “that I can invest in one mutual fund company and across several of its schemes through one folio only.”

“That’s wrong! You need to open different folios for different schemes, even if all the schemes belong to one mutual fund company.”

“Really?” I asked him.

“Yes sir. I’ve been advising mutual fund investments since the last five years, and this is an old rule.”

These words from the advisor (what he claimed to be) were nerve-wrecking.

“He has been duping small investors for the past five years!” I said to myself. “God knows how many investors have been fooled by him and his company.”

I then told him my background and how it was disgusting to know that he was fooling investors by leading them to invest in dud mutual fund schemes, and that too every scheme in a different folio number.

I also told him about the man I knew (my friend’s father), who had so many bad schemes in so many folios, and a majority of them invested through this financial advisor’s company.

“How can you say that they are dud schemes?” he countered, now in an aggressive tone.

“That’s not the point,” I said. “The point is when I see someone holding more than 20-25 mutual fund schemes in his portfolio, I can say for sure that most of them will be dud schemes given the poor track record of a majority of mutual funds over the past many years.”

“And that’s not the only point,” I continued, “When every scheme has different folio number, I know something’s fishy.”

“But we don’t get commission on every new folio,” he replied.

“I know that! But you still used to get commission on every new investment. And a greater commission on NFOs (new fund offers). Add to this the client’s headache in maintaining so many folios.”

“But sir…”

“But what? You’ve made life difficult for the physically challenged dependents of your client who is dead now. I don’t know how many such people have you caught into your poisonous net.”

“And then, you’ve advised a 75 year old man to invest in IT, real estate funds, mid cap and small cap funds that are so unpredictable and volatile! How could you do that?”

“These must be old investments sir,” he said.

“So what?”

“That time these themes, like real estate, were in craze. So we advised people to invest in them.”

“You mean you advice people based on the ‘hot theme of the day’?”

“Who knows the future sir,” he said. “We didn’t knew these schemes will not do well in the future.”

“So why did you advise people to invest when you yourself did not know what the future held for such risky schemes?”

“As I said sir, who knows the future? Do you know it?”

“Certainly not,” I said, “And I don’t claim to know it anyways. But you guys are playing with the hard-earned money of poor, small investors, showing them future dreams that ultimately end up as nightmares.”

“Anyways, can I talk to your senior?” I asked him.

“Why sir?”

“I want to tell him that I’ll be complaining to SEBI about how your company is treating investors.”

“W-w-w-why do you say so?” he fumbled as he said this.

“Because you and your company are fooling investors.”

“Okay, I will call him,” he said keeping his phone’s receiver down.

He came a minute later (after possibly having discussed it all with his ‘senior’) and said, “The senior officer is busy in a meeting. I will ask him to call you.”

Well, I’m awaiting that call since yesterday morning. And I’m sure it will never come.

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About the Author

Vishal Khandelwal is the founder of Safal Niveshak. He works with small investors to help them become smart and independent in their stock market investing decisions. He is a SEBI registered Research Analyst. Connect with Vishal on Twitter.

Comments

  1. All of then should be shot. All that they think about it making money, You know this is the reason people dont trust the insurance guys. rather dont dont anyone with money.

    i am sure he will call you. he must be planning on how to handle you when he calls. they would be afraid now.

    • Vishal Khandelwal says:

      Dear Vikrant,

      Thanks a lot for your comment.

      Yeah, even I hope such people get afraid of wrongdoing that they have perpetrated on gullible investors for so long.

      Regards,
      Vishal

  2. Dear Vishal,

    It is a very usual story that happens even today. Everyday thousands of investors are being fooled by the new generation Brokers (sorry Relationship Managers) working for Banks, Brokerage houses etc.

    I put the onus on the investors to get educated before doing anything with their money otherwise there is every possibility of being robbed by these brokers.

    Being a NRI from Gulf, couple of weeks back, I had similiar convesration with a Relationship Manager (big words) from Wealth Management Unit (should actually name them Wealth Destruction Unit) of a prominent Bank in Gulf. I shall write to you (by email) shortly about it. You may post it in Safal Niveshak for the benefit of the readers from Gulf. I am sure many of the NRI’s are already trapped in the Wealth Destruction.

  3. vikrant says:

    Its an irony that these big banks and investment company’s are able to fool the investors, and the GOV is not doing much about it, there should be strict regulation around financial system. the current regulation is not enough to protect the small investor.

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