Weekend Roundup – Mar. 1st 2014

  • First an update on the mutual fund and financial goal tracker. I have pretty much frozen the features of the tracker. I thank everyone for some incisive feedback. Thanks to you I have now included
    • the ability to calculate LTCG with indexation. Here is the stand-alone mutual fund capital gains calculator derived from the tracker.
    • auto-update goal calculations
    • the ability to handle NFOs
    • corrected major errors in SIP and lump sum investment sheet
    • modified error messages for better user experience.
    • The near-final version is now ready. If anyone is interested to test this out leave a comment. I will try and post the final version towards the end of the coming week.
  • My financial plan creator has become popular in LinkedIn among international financial planners.  I would urge you to give it a try if you have not done so. It is a reasonably quick way of ascertaining ‘where you stand’ moneywise. On Jan. 2 it was featured by paper.li – a content curation service in its Financial life planning module. Several Indian financial planners  have also started using it. Some have given me suggestions to modify it for working couples. I will try and get to this soon.



The Thinker. Photo Credit: Brian Hillegas (Flickr)
The Thinker. Photo Credit: Brian Hillegas (Flickr)
  • Upfront commissions to mutual fund distributors by AMCs and to sub-brokers by main distributors is not a healthy practice. It could lead to distributors pushing unsuitable products to investors because of the commissions involved. To sow the seeds of conflict of interest, all you need to do is to dangle a carrot. Nothing illegal about it. The money is not coming out of the investors pocket. Then again, it is always hard to prove that mis-selling is illegal. I am not a fan of moneylife magazine when they claim to be beacons of financial literacy. However, when it comes to scandalmongering few can beat their team! Read on … Is SEBI aware of huge mutual fund upfront commissions? One-sided and half-baked as it potentially could be (or is!), it does help create awareness.
  • Related articles posted by Sunderajan Padmanabhan at Asan Ideas for Wealth FB group.
    • Why upfront commissions need to be banned?
    • How MF distributors earn their commission  “… an upfront commission is easy money. It is earned by fanning out to ‘target’ investors and persuading them to invest in the ‘new’ product. The payment is for the effort of finding, convincing and closing a sale. It is a pure sales incentive. It also works like one, with clear targets for mobilisation and mark-ups for those that sell more. It also works in a small window of time when the new fund offer is open. Therefore, in order to earn an upfront commission, which can yield the distributors a fat, one-time income, and an all-expense paid trip to an exotic land, all that a distributor has to do is to walk the road and collect the cheque. Upfront commission encourages selling and a transaction-level activity with investors. It is a far cry from the real advisory effort of selling right and placing the customer first”.
  • SEBI had mandated that financial planners should not distribute mutual funds or sell insurance products.  Amusingly, it has said there should be a ‘arms length’ distance between the planning and distribution arms. This vague statement appears to be open to interpretation. While many others have not even bothered to comply with the regulation. Read my earlier roundup post for related links.
    • It is obvious that this arm lengths definition has split opinion in the industry. Here is story by livemint. A quote from the article. “Sebi mandated that investment advisers should maintain an arm’s length between their advisory and distribution businesses. …. ‘This is not in true spirit. How can you maintain an arm’s length if your family member heads that other division? The Sebi investor adviser guidelines has no definition of arm’s length’, said Gaurav Mashruwala, a Mumbai-based financial planner”.
    • Here is another extensive article on the subject:  Is your business now illegal?The issue is with individual distributors who are keen to become RIAs (registered investment advisers). A potential solution would have been to have an ARN (AMFI Registration Number) in a family member’s name while the most qualified and experienced individual in the family applies for an RIA licence. A few IFAs who sought SEBI’s guidance on such a modus operandi have apparently been informed by SEBI that this will not be looked at favourably by SEBI. SEBI’s ED also suggested likewise at the IFA Galaxy conference last week. An IFA who wishes to become an RIA has to necessarily take a choice between commission vs fees. He has to give up all commissions and start building a fee income stream – unlike his larger counterparts who can create hybrid models and enjoy both revenue streams”


  • Prominent members from the financial advisory services refused comment on the ‘arms length’ definition when I contacted them in this regard.


  • The stench in the financial services industry is nauseating. I sincerely hope these developments make retail investors like us recognise that the way out is to do it ourselves: Imbibe, Implement and Ignore
    • Imbibe the basis, asap
    • Implement the basis, asap
    • Ignore the bull shit, asap
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6 thoughts on “Weekend Roundup – Mar. 1st 2014

  1. Sir, Can i get the beta version of the mutual fund and goal tracker pls? Hope your mom is better.

  2. Sir, Can i get the beta version of the mutual fund and goal tracker pls? Hope your mom is better.

  3. Congratulations for international acceptance….. Though such things may be as usual for you and Ashal, it is really a good thing to have 🙂

  4. Congratulations for international acceptance….. Though such things may be as usual for you and Ashal, it is really a good thing to have 🙂

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