Businessworld forayed into the domain of Mutual Funds for the first time in August 2016, with its power packed and content intensive "Mutual Fund India Summit 2016", organized at Trident BKC, Mumbai. The day long summit witnessed over 30 thought leaders, entrepreneurs and industry titans hold the attention of close to 300 attendees from the IFA fraternity.
The first panel of the day was aptly titled "Out of the Box Thinking". The aim of the opening panel was to encourage the IFA's present in the audience to think beyond the realm of the traditional.
The opening panel was moderated by Rahul Parikh, Head - Aditya Birla MyUniverse.
Manish Shah of BigDecisions, Harsh Gahlaut of FinEdge, Sanjiv Sinha of IIJP and PV Subramanyam (one of India's foremost financial trainers) completed the heavyweight panel.
The panel unanimously agreed that in spite of the Mutual Fund industry in India completing 50 years, overall penetration and especially retail participation, still remain abysmally low. The need of the hour is the ability to innovate and think out of the box."I think this industry needs a Whatsapp Movement", said Parikh of Aditya Birla aptly. Parikh called upon the co-panelists to discuss and debate what that next "Whatsapp Movement" in the Mutual Fund distribution space was likely to be.
Digital disruption and the rise of emerging technologies to simplify Mutual Fund transactions are likely to play a key role in emerging business models of the future. As Parikh pointed out, the industry needs to draw upon successful international examples (such as M Bank in the Netherlands or EasyPaisa in Pakistan) in this regard.
Manish Shah of BigDecisions pointed out that most of the innovation that is currently taking place in this space is really revolving around the ease of buying a product, if one has already decided to buy a product! Shah believes that an equally important question to ask is - "why aren't more people wanting to buy this product?"
Shah rightly observed that the players in the ecosystem need to get together to innovate and create awareness and demand for Mutual Funds as a product, before anything else. He also mentioned that India is a country that has three times as many jewellers as financial services outlets, and future innovation needs to revolve around demand creation and pulling new customers into the fold.
Harsh Gahlaut of FinEdge described his SIP based distribution business as 'non-disruptive' in nature, and innovative only in its ability to take a proven and successful approach to long term wealth creation to a much larger segment of clientele.
Gahlaut agreed with Shah, stating that the biggest roadblock to innovation in this business isn't the paucity of technological advancements, but rather the fact that most Indians are still jittery to move beyond the realm of physical assets such as Gold and Real Estate.
On Parikh's point on how regulations are likely to affect 'out of the box' business models, Gahlaut expounded that in the long run, the tightening of regulations was likely to have a net positive effect on the industry's growth by driving up retail participation and increasing trust among the masses. He also claimed that the recent innovations in transaction processing technology have helped his business significantly.
Sanjeev Sinha, President of IIJP stated that significant opportunities for creating innovative business models exist in foreign markets such as Japan. Although there is a massive interest amongst Japanese investors to invest in India, they do not find the bandwidth, information or financial advisory to help them invest in India. He mentioned that innovators need to create new vehicles such as Japanese market specific robo advisors, or leverage existing information platforms to enable Japanese investors to invest in India.
Sinha admitted that such a business model would require a longer term perspective; but it's pursuit was likely to be fruitful, given that Japanese people have a collective $15 Trillion lying in savings bank accounts, earning next to nothing!
PV Subramanyam presented a counter point of view, stating that the industry needs to think less out of the box and worry more about thinking 'within the box' and about achieving incremental growth, as India is still a vastly underpenetrated market and significant potential to scale still exists for traditional players as well. He said that most IFA's can just double their books just by getting their basics right and communicating a few simple messages to friends and neighbours of their existing clients!
Subramanyam stated that simplification is more important than innovation at this stage, and the regulator needs to contribute to this widespread simplification and demystification of mutual fund products as a whole. He also proposed that large retail players outside of banks (such as SodexHo) could potentially provide a 'lower conflict' means of improving retail participation compared to channels such as banks.
Shah of BigDecisons rightly asserted that innovations would benefit the ecosystem as a whole, without leading to the "poaching away" of business from existing distributors - simply by forcing clients to dig deeper and think harder about their choices and decisions. He cited the example of WebMD, which has 140 Million unique visitors a month - but hasn't led to a reduced number of doctor visits.
On the point of Robo Advisory, Gahlaut of FinEdge voiced that although Robo Advisory has immense potential for the future of the Mutual Fund distribution business, it is not the 'only' business model for this country.
The panel was concluded succinctly by Parikh, declaring that a significant amount of work needs to be put in both outside of and inside the box in order to develop the Mutual Fund distribution business to its full potential over the coming decade.
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