‘Readymade Solutions’ to create a corpus for your child’s education or for your retirement or for that matter any other financial goals are being offered by Mutual Fund houses or Asset Management Companies (AMC) in different fashions and names – have not we all come across such new offerings recently, sometime in a big hoarding while coming back from office in the evening or in our morning newspaper advertisement or in the back-cover of a fund-house factsheet …?
Let us take a look at this new phenomenon from three angles:
1) Reasons behind
There could be three probable reasons behind such a new trend in product offerings by AMCs:
- Finally AMCs are coming in terms with the fact that they cannot solely depend on agent/distributor network like before abolishment of entry loads from mutual fund. To play the agent’s role directly to individual retail clients, AMCs have to come out with a solution or a package as clients are not expected to choose every single scheme themselves from the plethora of schemes to fulfil some or other financial goals.
- It is a fact that only a few schemes of an AMC becomes and stays popular. Other schemes just remain ‘also-ran’. But if such ‘also-ran’ schemes are put inside a package and sold as a ‘solution’, chances are more that these schemes will get sold and build up more corpus.
2) Pros
Marketing of these new offerings are spreading awareness about ‘financial planning’ to retail investors, even though upto a limited extent, still it is noteworthy. Investors, who were used to buy products only and never ever bothered about ‘financial plan’, are now finding themselves buying a plan (in whatever form), and becoming little more disciplined also in the due process.
3) Cons
A plan has to address individual issues, concerns and goals before getting enacted. Customisation is not a choice here, but a basic feature of any financial plan. Unless you feed in ALL your financial figures – income, expenditure, age, number of dependants, assets, liabilities, goals, timeline etc. – a financial plan can never get generated in the first place. These new offerings are seriously lacking here. I agree, that none of these AMCs are making any claim that that they are selling a financial plan here, but the way these are being advertised, for a retail client it will surely pose as a ‘financial planning solution’, which it is surely not.