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Mr. Nathan, you are misrepresenting distributors

Sunil (Mr. Bond) Jhaveri, MSJ Capital, Gurgaon

25th April 2016

Narendra Nathan of ET tweeted his view saying distributors may be a vanishing tribe, which follows an article he penned earlier, titled "MF distributors behaving like angry birds"

Mr. Bond has taken strong exception to Mr. Nathan's rather disparaging views of the distribution fraternity, and wrote this letter to Mr. Bodhisatva Ganguli, ET's editor, to bring to his notice where this writer has erred, by coming to conclusions that are not really supported by facts.

If distributors want media to present a balanced point of view, you need to emulate what Mr. Bond is doing, by proactively communicating with mainline media editors, to help them get a proper perspective and encourage their reporters to adopt a more balanced and fact based stance.

Dear Mr. Ganguli,

I am an avid reader of your paper. I am also a Financial Advisor of repute with more than 30 years of experience. I have been advising corporate clients on their treasury management. I also conduct workshops for Independent Financial Advisors (IFAs) pan India & guide them on various aspects of Mutual Funds. I conduct Investor Awareness Programs across the country & also advise Mutual Funds on how to position their own schemes & products.

Reason I am giving my detailed back ground is so that you understand that I am one of the important voices of the mutual fund industry & a lot of IFAs & MFs look up to my views & comments on various issues relating to MF industry. My comments are frequently reported in various business papers including ET.

As you are aware, the MF business, especially Independent Financial Advisors (IFAs) are reeling under tremendous pressures due to constant regulatory changes. I am not writing this letter to go into merits & demerits of the actions & inactions of the Regulator. Reason I am writing this is for a different purpose.

It is extremely satisfying to see that such an esteemed paper like ET has taken up some of the causes on behalf of the IFA community; example being your paper's recent editorial titled : DISTRIBUTION KEY IN FINANCIAL PRODUCTS:

On one side, your newspaper is supporting IFA community (and rightly so) by stating that penetration of MFs cannot happen without active support of the IFA community and how investors will suffer if they go DIRECT after looking at Commission disclosures (new SEBI guidelines); on the other hand one of your journalists- Narendra Nathan - is out make sure that the IFA community actually becomes extinct.

He uses words like "MF Distributors behaving like Angry Birds", "MF Industry is expected to continue on growing path even though the distributor may be a vanishing tribe":

Some of his Tweets & Article links:


His Article:

MF distributors behaving like angry birds. Here's why:

Let me point out where facts end & fiction begins:

His comments in the above article:

  1. "As per regulations, RIAs can only charge fees for their advice and can't get any commission from mutual fund houses, so they are expected to give unbiased views. And this will take care of conflict of interest (i.e. pushing schemes that fetches maximum commission) prevalent right now in fund distribution."

  2. He is not even aware that RIAs can follow Hybrid Models. Most RIAs (under corporate structure) follow this model. They can have both Distribution Model (commission based) as well Advisory Model (Fee based model). Out 400 odd RIAs, majority of them are RIAs are following this dual model

  3. "They are angry at fund houses and AMFI for not supporting them in their fight against Sebi. They are angry at `fee-based financial planners' for poaching their clients. And they are angry at media for disseminating the fact that `direct plans have lower expense ratio'."

  4. On the basis of what facts has he come to the conclusion that distributors are angry with fee based planners for poaching their clients? Is there any market share data that he has seen? Is there any other evidence of "poaching" and anger against fee based planners? Yes, distributors are upset with media - not for disseminating the fact that direct plans have lower expense ratios, but by selective dissemination of facts that lead to incorrect conclusions. Direct plans have lower costs, but also do not have the benefit of any guidance - either from an advisor or a distributor. When you only harp on lower cost, without also mentioning lower benefits, you lead an investor to erroneously conclude that direct plans are better because they are cheaper. Since when did every cheap product become the best? Is the cheapest car the best car? Is the cheapest medicine the best medicine? Media is leading investors to a potentially dangerous conclusion that cheapest is the best when it comes to mutual funds.

  5. "The main argument put out by fund distributors is that `Indian investors won't pay fees'. This is a totally flawed argument and only shows their lack of ability. There are several fee-based advisers already and if they are able to collect fees, why not new advisors?"

  6. Little does he know that most IFAs are true blooded entrepreneurs who would have shifted to the Fee based model, if it was so easy. An entrepreneur would naturally gravitate towards a model which is demanded by customers and which is economically viable. How come out of more than 10,000 active IFAs only a handful have opted to be RIAs? How come bulk of RIAs today are those who are operating a hybrid model and not pure RIA models? He argues by saying that if it was so difficult then how come people are paying fees to Doctors, Lawyers, etc. Again he is far removed from reality in not differentiating between a PULL SERVICE v/s PUSH SERVICE. People pay doctors, lawyers as these are already PULL services; whereas MF Industry is still in its nascent stage which is PUSH Service. You don't have to educate any citizen of this country that when you are sick, you need to consult a doctor. But we still need to educate over 90% of our citizens that if you want to win the fight against inflation, mutual funds are your best friend.

  7. Second, Mutual Fund Utilities (MFU) has allowed its online investors to go for direct plans from January 1. Several `dedicated direct plan sites' are also in pipeline and are expected to hit the market soon.

  8. Here he is trying portray that DIRECT is the way to go forward for investors & they will benefit due these platforms & RIAs. How flawed is this premise? Little does he understand that AMCs are only manufacturers like Pharma Companies, IFAs are the Doctors & Investors are their patients. IFAs (Doctors) need to understand their needs (symptoms of patients) & prescribe the right solutions (schemes) to their investors. Besides managing their investments, IFAs have to even manage emotions of their investors as well. Little does he know that Investors need to be protected from their worst enemy viz. Investors themselves & their emotions. All this can never be done by ROBO Advisors & platforms.

Mr. Nathan has done this before as well

In the past as well, I had pointed out one of the factually incorrect article which was published in your newspaper & incidentally it happened to be written by the same journalist. I am reproducing excerpts from that letter which was sent to the then Editor of ET viz. Mr. Rahul Joshi & my response to the same:

  1. "Another such article which created strong resentment was published on August 25'2014 (author: Mr. Narendra Nathan): "PPF RETURNS CAN BEAT SENSEX OVER 20 YEAR PERIOD":

  2. Excerpts of some portion of the article:

  3. "A look at the Sensex returns chart in the past 20 years could be a bit disappointing even for a hard-core investor.

  4. The Sensex closed at 4,588 in August 1994 and despite being at a lifetime high of 26,420 now, it has only generated a mediocre annualised return of 9.15% during this 20-year holding period.

  5. Several debt products, like the Public Provident Fund (PPF), have generated better annualised returns of 10.46% in this period."

  6. My Response which I had shared with Mr. Rahul Joshi (your predecessor):

  7. What the author has failed to understand is the wrong comparisons of these two asset classes. PPF is an annual investment by the investors to take care of concessions u/s 80 C of the Income Tax Act. Similarly, he needed to compare ELSS schemes having the same benefits u/s 80 C on yearly investment basis & not as point to point returns from 1994 to 2014. If he would have applied his mind based on the above & created comparison of apples with apples & not apples with oranges & seen the following data, even the worst critics of Equity would have had different views on inadequacy of PPF to generate long term wealth v/s Equity as an asset class.

  8. Following chart shows the current value (as on July 31'2014) of Rs.1 lac invested every year in ELSS v/s PPF:

  9. imgbd

  10. As can be seen from above, even the worst performing ELSS has outperformed PPF over shorter time horizon of 3 years & over longer periods beaten PPF returns by a huge margins."

After reading the above, now you can appreciate as to how he is misconstruing facts, misrepresenting them to suit his skewed ideas & views (just to prove his point). How can you let someone who does not understand basic facts in the case to write such articles & misguide your own readers? He chose to take one particular data point to suit his own hypothesis.

We know that Pen is Mightier than Sword. We also know that those with a pen in their hands need to be more responsible & even extra careful on how they use this weapon for the good of all.

He seems to be a one man crusade to wipe out the IFA community thru his anti IFA and factually wrong propaganda. Does such an esteemed, well established Business Paper like yours have the moral right to talk against one segment of the society who are trying to earn their rightful bread & butter, who are registered ARN holders, who are doing a tremendous service to the society at large by helping them to meet their goals & aspirations, hand holding them thru tough times & even managing their emotions (which according me is the tougher part - tougher than managing their money)?

Does anyone think that Mr. Modi (our Hon. Prime Minister's) dream of Sabka Saath, Sabka Vikaas is possible without the help & efforts of the IFA fraternity? Does anyone think, that the miniscule penetration of 2% of Indian Household in Financial Products (away from traditional products like FDs, Gold, Insurance, Real Estate, etc.) can be enhanced without the support of 1000s of IFAs spread across the length & breadth of the country? Does anyone think, that this penetration will happen in B15 Cities & other rural areas by promoting DIRECT? And more importantly, can anyone take away the role of these same IFAs (Yours Truly included) who have put their heart & soul into this profession & brought the MF Industry to its current level.

Then instead of supporting the IFA community in continuing their good work by writing the correct perspective & also taking their voice to the Regulator & the Government levels thru your esteemed newspaper; why are some journalists out to kill this industry thru wrong & false propaganda & misguiding the readers who are finally investors as well?

I would personally seek your intervention on behalf of the entire IFA community to reign in such journalists who are not doing their duty correctly. They are only trying to create sensationalism by using such derogatory words against a community which is doing their bit in helping the investors to manage their goals & aspirations. Just because the Regulator has a different view does not give any right to these journalists to talk in any language & at the same time misguide these hapless investors.

People; especially journalists from such a well know Media House should know ground realities before reporting them, should avoid giving biased views against one section of the Society just to get a few more eyeballs for his articles, should avoid using such derogatory remarks in describing the IFA community as community of Angry Birds & Vanishing Tribe.

Please intervene in this matter at the earliest as this kind of journalism will not only harm the IFA community, but will also harm the good brand of your Newspaper as well as misguide your readers who are ultimately investors. Just because there is no regulation by SEBI on journalists, does not give them any right to present wrong facts, figures & data just to suit their articles.

With warm regards,


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