Wishing you a very Happy New Year 2021 – Let this year be a milestone in your Health, Wealth & all You Care About!
Here is a pointwise account of:
Most Important Changes in 2020 in Mutual Funds
Most Important Changes in 2020 in Investment Industry
Most Important Changes in 2020 in Insurance Industry
Most Important Changes in 2020 in Wealth Management
So we start from the Mutual Funds
Most Important Changes in 2020 in Mutual Funds
The year 2020 was an eventful year for the MF industry. MF industry not only faced criticism in Managing Debt, but it also saw huge money going out due to the greed of investors in Equity. Many SIP got closed so inflow & outflow prevailed. Not all is bad as the industry as a whole crossed 30 Lakh Crore mark. By 2025, Morningstar estimates this figure to cross 50 Lakh Crores. Major changes that made headlines:
All Digital – Covid-19 pandemic
The covid-19 pandemic struck in March end. Mostly MFs close their performance year at that time. So the last few days went in haywire. As investors, a huge amount got saved which generally is spent on performance reviews, motivation building tours, gifts, etc.
Covid has changed the way the MF industry works now. Local Offices remained closed during the second half. Entire office setup, transactions, or meetings, everything has shifted to digital. Over a period of the last 9 months, all events shifted to digital – & the presence has increased. What a pandemic way to learn!
Markets Testing Your Character
In January, the markets touched an all-time high then went for a 35% correction and then again regained back with new highs in Oct -Nov. Many investors could not bear this volatility and closed or redeemed SIPs. But many came back asking “when to enter again?” by the year-end.
What’s in the Name?
MF distributors are no longer allowed to use nomenclatures like ‘independent financial advisers’ (IFAs) and ‘wealth managers’. Similarly, SEBI finalized new regulations on investment advisors. Now individuals can be Investment Advisor or MF Distributors. Not BOTH. More choices for you to make.
New MFs
Trust Group, a financial services company, has forayed into the mutual funds business. Sachin Bansal (Flipkart Fame) has taken over Essel MF.
Many players are keen to enter soon. These are – Bajaj Finserv, Zerodha Broking, NJ IndiaInvest, Karvy Stock Broking, (I don’t know how will they do now as their stockbroking arm is banned by SEBI), and Frontline Capital Services.
It gets lonely without the MOTABHAI – Mukesh Ambani’s Reliance Jio Infocomm has given feelers that it can enter the mutual fund distribution business by using JioMoney.
Bye-Bye to Yes Bank as they exited the MF industry. They sold 100% to GPL Finance and Investments Limited (GPLFI) which is owned by White Oak Investment Management.
Celebrities to promote MF
You must have seen AMFI ‘Mutual Funds Sahi Hai’ campaign with cricketers as brands. AMFI also became the associate sponsor of the Indian Premier League 2020. What a Shot!
TDS on Mutual Funds
Budget 2020-21 has asked fund houses to deduct 10% of TDS from dividend income exceeding Rs 5000 from mutual funds. This means DDT is removed.
Scheme re-categorization
SEBI introduced a new fund category – The Flexi Cap Funds. SEBI asked fund houses to invest at least 75% of the total fund corpus with at least 25% exposure each to large-cap, mid-cap, and small cap stocks. The news created a spur as the largest funds are in Multicap Category. Means there was a sale waiting to happen. But AMFI again rescued the situation by allowing to convert existing funds to Flexicap.
Regulators also tried their hand at debt fund categories safer after Franklin Templeton, IL&FS and many more events shook the trust. SEBI reinforced new investment guidelines for a corporate bond fund, credit risk fund, and banking & PSU fund by letting fund managers to increase their exposure to safer debt securities like g-secs and treasury bills by 15%.
Listed AMCs
Many MFs are listed now. This year UTI AMC became the fourth fund house to get listed on BSE and NSE. Shriram AMC, HDFC AMC, and Nippon India MF are already listed entities. Also, India’s largest registrar and transfer agent (RTA) of mutual funds, Computer Age Management Services (CAMS) went tasting the listing sweets.
NAV Applicability
Suppose you see the market down and have a surplus to invest in. You call your advisor and ask if you can get today’s NAV on purchase. Post 1 Feb 2021, he would say – NAV will be applicable when AMC (MF) receives your money to utilize. This means if you buy it through cheque and it takes 2-3 days to clear the NAV will be applicable of the day funds have reached AMC for use. his will be applicable for any amount small or big & any category of schemes.
Way out is RTGS/NEFT & Transfer of funds, but you know these are not so efficient. Your NAV will now depend on how fast the BANKING System is!
Changes in 2020 in Investment Industry
New Taxation Vs Old Tax Regime
Budget 2020-21 has proposed a new tax regime. It allows taxpayers the option of a lower tax rate slab if they forego various exemptions and deductions.
New Margin rule
SEBI introduced new margin rules for Brokers which affects the Equity Investors. These rules are 2 phased and they have started to implement. This has impacted volumes a bit.
Entities Banned
One of the biggest stockbroker (Karvy) was banned. Yes bank, LVB management changed. FT wounded up 6 debt schemes after market hours and investors are waiting for a court verdict. Many of these events did not help the growing industry.
Most Important Changes in 2020 in Insurance Industry
Standardization of plain vanilla policies
IRDAI’s directed, all general and standalone health insurers to launched their Arogya Sanjeevani Policy, a standard health insurance that comes with uniform features.
This policy has comes with sum insured of up to Rs.5 lakh. Many insurance companies have launched this product.
Very soon, non-life general insurance companies will also offer standard personal accident insurance product with uniform features and benefits also.
In the same spirit, life insurance companies will come up with a standard term insurance policy called Saral Jeevan Bima from January 1, 2021. LIC has announced its policy.
Standard policies will reduce mis-selling, increase claim settlement & provide insurance to the masses.
Clarity on Pre-existing conditions
Currently, if a policyholder was diagnosed with a major ailment within three months of buying a policy, insurance companies would consider the disease a pre-existing condition. But now, Insurance companies will have to accept claim if a policyholder contracts after buying a health insurance policy.
Other Changes in Insurance Sector
- Additional requirement for agents to sell ULIPs
- Pre-defined agent rewarding system so that commissions are transparent.
- Aadhaar as a valid KYC proof
- No need for physical in-person verification by agents
- Color coding to indicate the complexity of health policies (Green Orange Red)
- New Distribution Channedl like Appolo Pharmacy allowed.
Changes in 2020 in Wealth Management
Changes in PMS
SEBI has banned upfront commission in PMS. Direct Option has started in PMS.
Franklin Event
Franklin Templeton MF decided to wind up its six debt schemes – Franklin India Ultra Short Bond Fund, Franklin India Low Duration Fund, Franklin India Short Term Income Plan, Franklin India Income Opportunities Fund, Franklin India Credit Risk Fund and Franklin India Dynamic Accrual Fund with a combined approx AUM of 30000 Cr.
It has not happened in India so far and so the debate went on questing the motive, way, timing, roles of regulator & fund management. Mr Sanjay Sapre, in a recent call, said – “Don’t Call it a Scam or Haywire”. But he also said the solution to the problem is – “When Money is returned Back to Investors”.
The investors still waiting & voting for a safe resolution while I am writing this.
With these snippets, we dash into 2021- the year of recovery & hope!
