Another interesting and credible strategy resorted to by the fund houses during the season is that they try to attract investors by declaring dividend on existing schemes. This year too the process has started with UTI Mutual Fund declaring a dividend of 15 per cent on its tax-saving plan, Bharti AXA Tax Advantage Fund paying 30 per cent, ICICI Prudential Tax Plan announcing 40 per cent, and JP Morgan Tax Advantage Fund declaring 15 per cent. This strategy in particular, is quite effective for AMCs, believe notable experts like Dhirendra Kumar, CEO, Value Research, as the dividend payments made right before the last quarter of a financial year reduce investors’ burden by a good margin, which would mean a lot to the investor and quite matches the marketer’s point of view.
But then, the strategy of luring customers at the last moment comes with a problem that surfaces due to a sudden rush. The biggest trouble that hits the investors at this very moment is the fact that most of the time, agents making the sales pitch only convey the fact that by investing in a particular instrument, the investor will qualify for a deduction under section 80(C). At best, they tell the investor a few more details like past performance and expected returns. But many a time, neither do they reveal the complete details of the product, nor does the investor feel the need to ask, which he expectably would have done otherwise if he had purchased the instrument some other time. As a result, investors land up investing in instruments that charge them relatively higher. According to an agent of Birla Sunlife Insurance, “Most of the clients we meet during the last quarter seem eager to park their money in some tax-saving instrument. They really don’t bother as to where their money is actually going in (relatively speaking), what are the charges and how much does it suit to their requirements. Their only parameter is whether this investment qualifies under Section 80(C) or not! This is the reason because of which certain agents simply suggest those schemes to the investor, which would entail the agent earning a better commission. This ultimately means higher charges for the investor.” Clearly, all this is pure conjecture when seen in a general context. With as many as 40 mutual fund schemes and numerous insurance schemes available in the country at present, there is no doubt the competition is bound to intensify in the last quarter when investors open up their wallets. But does it mean that the people genuinely interested in tax planning should suffer for those who opt for dumping?
Certainly not, but in reality, it happens. After exhausting a bigger portion of their spending budget, service providers in a way reduce their activities in the succeeding quarters. The same marketers who were focussed on providing the customers with their best schemes suddenly disappear and the ball falls in the investors’ court to chase the agents. The same is the case with Ruchika, a working woman, who in the month of May wanted to make her investments in a planned manner with smaller amounts spread throughout the year, rather than in one go at the end. “But I couldn’t get guidance that was satisfactory. Finally, I just called up one AMC and parked all my money with their best scheme,” says Ruchika.
There are thousands like Ruchika, who are waiting for someone to actually guide and help them the understanding the benefits of tax planning. But however hard this might sound to the “consumers’ beware” coterie, it’s perhaps not the responsibility of fund houses or insurance firms to educate the consumer – but of the regulatory authorities, which have failed so far to ensure a unified message across platforms focussed on tax saving.
But then, the strategy of luring customers at the last moment comes with a problem that surfaces due to a sudden rush. The biggest trouble that hits the investors at this very moment is the fact that most of the time, agents making the sales pitch only convey the fact that by investing in a particular instrument, the investor will qualify for a deduction under section 80(C). At best, they tell the investor a few more details like past performance and expected returns. But many a time, neither do they reveal the complete details of the product, nor does the investor feel the need to ask, which he expectably would have done otherwise if he had purchased the instrument some other time. As a result, investors land up investing in instruments that charge them relatively higher. According to an agent of Birla Sunlife Insurance, “Most of the clients we meet during the last quarter seem eager to park their money in some tax-saving instrument. They really don’t bother as to where their money is actually going in (relatively speaking), what are the charges and how much does it suit to their requirements. Their only parameter is whether this investment qualifies under Section 80(C) or not! This is the reason because of which certain agents simply suggest those schemes to the investor, which would entail the agent earning a better commission. This ultimately means higher charges for the investor.” Clearly, all this is pure conjecture when seen in a general context. With as many as 40 mutual fund schemes and numerous insurance schemes available in the country at present, there is no doubt the competition is bound to intensify in the last quarter when investors open up their wallets. But does it mean that the people genuinely interested in tax planning should suffer for those who opt for dumping?
Certainly not, but in reality, it happens. After exhausting a bigger portion of their spending budget, service providers in a way reduce their activities in the succeeding quarters. The same marketers who were focussed on providing the customers with their best schemes suddenly disappear and the ball falls in the investors’ court to chase the agents. The same is the case with Ruchika, a working woman, who in the month of May wanted to make her investments in a planned manner with smaller amounts spread throughout the year, rather than in one go at the end. “But I couldn’t get guidance that was satisfactory. Finally, I just called up one AMC and parked all my money with their best scheme,” says Ruchika.
There are thousands like Ruchika, who are waiting for someone to actually guide and help them the understanding the benefits of tax planning. But however hard this might sound to the “consumers’ beware” coterie, it’s perhaps not the responsibility of fund houses or insurance firms to educate the consumer – but of the regulatory authorities, which have failed so far to ensure a unified message across platforms focussed on tax saving.
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