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Conflict of Interest

If you exit the fund that you are invested in and transfer to another, then it is a new sale for your advisor

When we purchase a mutual fund, there are two options in it – redemption and switch. Why do financial advisors suggest a switch and not redemption?

All this depends on the basis on which the financial advisor is suggesting certain things. It might have been suggested that you put your money in some other fund in case the fund in which your money is right now is not performing well. In such a case, if your money was to be invested somewhere else, then it might be for the good.

However, you may be thinking in the right direction on letting the money come directly to your account through redemptions. But the advisor won’t recommend that. Here, there may be a slight conflict of interest. That is because, if you exit the fund that you are invested in currently and transfer it to another one, then it is a new sale for your advisor and on that money he would get his commission.

But it depends on the basis of the suggestion by the advisor.

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