'We Educate Our Clients Through 'Money Talk' & Advisory Mailers'

C.R Chandrasekar, Founder & CEO of FundsIndia, spoke to BW Businessworld on the changing trends in MF distribution, the challenges his company faces in dealing with clients in Tier-2 cities, and how FundsIndia keeps their clients aligned to their long term goals while investing in SIP's.

How do you think the Mutual Fund distribution business has changed over the past 5 years?
The last five years have seen two significant changes in the mutual fund distribution business. On the one side, regulations have placed significant revenue pressures, resulting in a thinning of margins for distributors. On the other side, the mode of distribution has become increasingly digital/online. These two aspects are not unrelated - thinning margins necessitates widening of customer base (to retain revenue), and that is possible only with adoption of technology. From an investor's view point, the upshot is that they have access to a better investing experience (thanks to paperless transactions), without having to sacrifice advisory quality, thanks to the advent of services like Robo-advisory on digital platforms.

What are the unique challenges you face while dealing with clients in Tier-2 cities?
With the arrival of online technologies, there is a virtual "flattening" of the Indian geography when it comes to the access to products and services. As an online service, to us, a client in a remote village is as distant as a client in a distant metro. There are some differences in terms of the level of awareness, wherein a person in a metro is more likely to be aware of mutual funds than those who are in small towns. However, in terms of challenges faced by the two categories, there is not much difference. They both want access to a smooth investment platform and a quality advisory service. They are both investing hard-earned money and want to see it grow.

How do you ensure that individuals keep their SIPs running long enough to fulfil their goals?
As an online platform, we offer many flexibilities in terms of how an investor can manage their SIPs. However, to ensure that customers continue their SIPs, without any pause, we rely on continuous investor education initiatives. Customers usually get spooked by down markets without realising that is the exact time when they should run their SIP instalments. So, we continuously educate our clients through 'Money Talk' and other advisory mailers that staying invested is the right course of action.

Do you think that the high liquidity of mutual funds actually works to their disadvantage at times?
The high level of liquidity offered by mutual funds does tend to tempt investors with the availability of money when they need it. There are two ways we try to mitigate this situation - one, we encourage and counsel our customers to create a special portfolio in their account called a 'Contingency Fund' that would specifically be earmarked for redemption when quick money is needed. Secondly, whenever an investor is making an inopportune redemption request, we let them know (in the platform) the consequences of such withdrawals - both from a taxation perspective, and an exit load perspective - and let them take an educated, informed call on the action.

How does FundsIndia manage to hand-hold relatively uninformed investors during market downturns, given that you deal with clients remotely?
We truly believe that the most important way an investor makes money in the market is through their 'time in the market' and not by 'timing the market'. The only and most important way to impart this to our investors is by a very robust mechanism of investor education and counsel. At FundsIndia, we have kept multiple doors open for our advisory services - mail, chat, phone, video call, appointment, Skype, Whatsapp, etc. Investors reach out to us for counsel during turbulent times, and we virtually hand-hold them through these periods. Also, our Mutual Fund Research team takes great effort to do effective write-ups about the current state of the market, and the importance of hanging on. Disseminating these essays is also a vital part of educating our investors. Thirdly, as we said earlier, we don't wait for market downturns to communicate the need to stay patient in the market. We make it a part of our continuous investor education project.