The Hindu Business Line : Incentives roll the dice in MF tournament

INVESTED in a mutual fund scheme recently? You've just won your advisor an all expenses paid trip to Bangkok. The incentive schemes offered by asset management companies allow distributors and financial planners to indulge in the latest of electronic gizmos and exotic holidays, among other things.

Paying incentives to channel partner is an accepted practice in many industries. What makes it different here is that the incentive scheme offered is likely to influence the advice the investor gets from the financial planner or distributor. "The assets under management of some funds shoot up in certain periods. This is because the advisor is moving his customers from other funds to the fund that is offering him a good rewards. If an advisor is offered a CD player for getting Rs 1.2 lakhs in an equity scheme, he might get new investors for Rs 50,000 and for the rest, he is likely to call his existing customers and advise them to move from fund A to fund B," said Mr Zankhana Shah, an advisor.

Asset management companies are unwilling to discuss the issue of incentives. "We do not have a fixed budget for these schemes. The schemes are launched depending upon the market environment and competitors' activities," said Mr Sanjay Sachdev, Chief Executive Officer, Principal India.

Prudential ICICI offers some of the best incentives in the industry, says Mr. Murali Krishnamoorthy, a distributor in Pune. The company runs an incentive programme termed the "Chairman's Club".

Last year, 102 members of the Chairman's Club were taken to Dubai for a 4-day event, at a cost of over Rs 40 lakhs. "We work hard to make the minimum investment cut for Chairman's Club. Once in, the rewards are mind blowing - even training programmes are conducted in places like Bangkok, Goa etc," said Mr Sadashiv Phene, a large distributor in Mumbai. Mr Sumeet Sirsikar, Head - Marketing, Prudential ICIC AMC, was unwilling to comment.

The terms of qualification for most schemes indicate that the money invested should stay in the fund for three months. Once this period is completed, it is time to move some of that money into other schemes that carry better incentives. "The incentive programme motivates you to improve your performance. I focused on the funds that were under the scheme and won a computer recently," said Mr A. Vajani, a retail distributor.

The offers are different for independent financial planners and corporate distributors. DSP Merrill Lynch's Bulls Eye Mega rewards programme offers a cruise and an 11-day trip to Europe. The cash award for the same is a minimum of Rs 90,000. Principal's Privilege Plan offers independent financial advisors home theatre systems or laptops, with even early bird prizes thrown in.

"I have told my team that no matter what, we are going to Malaysia this year," says the sales head of a third party distributing company.

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