At the start of this year, I wrote a post: Will You Get Your Money Back, On Time? In that, I spotlighted the case of an investor who was unable to execute a redemption transaction on the website of a prominent fund house. His experience was all the more harrowing because, despite his best efforts, he couldn’t reach the customer service team at the fund house. As an investor, there were two aspects of that episode that I found particularly scary. The first was that the entire incident was the result of poorly designed processes on the part of the fund house. By my count, there were at least five questionable actions that were triggered through no fault of the investor. The second was the attitude of the people at the fund house who took no responsibility for what happened. That made me wonder if they would even bother to examine the flaws of their processes, let alone take any corrective action.
That was not an isolated case: it was just one that warranted a detailed post. Fact is, I have seen evidence of such flawed processes, across multiple fund houses. In this post, I would like to present another case, that transpired last week, and which should be of relevance to all investors. Here, too, the events described could have happened to almost anyone.
This case relates to a Mumbai-based DIY investor who attempted to redeem his investments in a certain ultra short term fund managed by another prominent fund house. This is a fund house that prides itself on the quality of its processes, and its customer service team. The investor planned to execute the transaction via the fund house’s website on Monday last week. But a day before that, on Sunday, when he went on the website to check the exact value of his investments, he was shocked by what he saw.
The summary showed the 
Being a Sunday, he had no way of contacting the fund house. So frantically, he called up people who might have an answer, but it got him nowhere. He spent a restless day, and night, and first thing on Monday, called up the fund house. He didn’t get an immediate explanation but someone assured him that they would get back. They did, but with a baffling reply. Apparently, in the course of the last switch that he had made (from an equity fund into this scheme), the fund house had deducted a lesser exit load than what was applicable. When they realized their mistake, they marked a lien against his units with the intention of recovering that amount.
Right away, that threw up several questions, none of which the customer service person could answer. Why hadn’t they simply written to the investor, or called him up? If for any reason, they had to mark a lien, why did they do it on the entire units, given that the amount to be recovered was merely 4,000 or so? Why couldn’t they explain it better on the account statement, instead of using an ominous word such as “pledging”? Why were they hassling him in this manner when it was the fund house which was at fault? What sort of processes did the fund house have in place if it couldn’t calculate the exit loads correctly? Wasn’t the investor entitled to compensation from the fund house for the mental anguish caused by its actions?
From what I could gather, the investor conveyed his intention to immediately withdraw his entire investments. The customer service person told him that he could do so, and that the amount would be deducted from the redemption proceeds. Unfortunately, even after that assurance, things didn’t go smoothly. As per the fund house’s service standards, the redeemed amount should have been automatically credited to the investor’s bank account, early morning on Tuesday. That didn’t happen. Once again, he was forced to call up the fund house and enquire what was going on. Eventually, a few hours later, the amount was credited to his account.
Many years ago, someone asked me what was the worst thing that could happen to a mutual fund investor. To that person’s surprise, my answer then, as it would be today, was that in my opinion, there could be nothing worse for an investor than to not be able to rightfully access his/her money at will. Just like the investor mentioned here, and the one in my earlier post, I have lived such a nightmare once: I hope that I don’t have to, ever again. I hope that you don’t have to, either.
Special thanks to Robin Jehangir for bringing this case to my attention.
