"Mutual Funds, To Some Extent, Will Never Be A Linear Industry"

Leo Puri, MD of UTI Asset Management Company & Chairman, AMFI engaged in an interesting and enlightening one on one chat with Clifford Alvares of BW Businessworld, during the power packed Businessworld Mutual Fund India Summit 2016 held earlier this month at Trident BKC, Mumbai.

"Mutual Funds, to some extent, will never be a linear industry", said Puri, when asked about whether the industry was at an inflection point. He added that the underlying drivers are 'very, very positive' for Mutual Funds. In Puri's opinion, a very key driver of the industry going forward is the country's deep and secular trend in terms of a transition from a developed to a middle income country.

According to Puri, the propensity for Financial Assets and overall income levels are going up steadily, as is the awareness about long term savings and retirement. He lauded the industry's efforts and sustained initiatives in this regard.

Puri also expressed confidence in the fact that most issues related to lack of trust and mis-selling are quite firmly behind us at this stage, and this has contributed to the positive outlook that he holds for the industry over the next decade.

Commending the efforts of the IFA community in bringing on board the first wave of investors into the fold of Mutual Funds, Puri called them the 'bedrock' of the industry. "The journey from 4 Crores to 40 Crore cannot happen without the sustained participation of IFA's", he said, while adding that the community is feeling a bit 'under siege' at the moment.

Puri went on to highlight the key elements which in his opinion may be leading to a sense of despondency amongst IFA's. The first, according to him, is the lack of understanding in the establishment or in the eyes of the regulators on the role that distributors play. "I think there's some truth to that, and we need to work to address that issue more proactively", he said. He opined that AMC's, AMFI, IFA's and the media need to put in a cohesive effort in this direction.

According to him, the second reason for the so called despondency is the notion of the shift to 'technology led direct', leading to a potential cannibalization of future income. "In the near term, of course that has had a very real effect", said Puri; while adding that around the world, phenomena like increased disclosures & transparency have not led to a fallout in the role of Advisors, and that Advisors only need to adapt to the same and move forward. He expressed his strong belief in the long term positive impact of such initiatives. "Disclosure is not your enemy; it is something you have to accept and live with", he advised succinctly.

The third issue for IFA's is the fact that the institutionalized distribution channel seems to keep growing inexorably. "That may not be a permanent trend", Puri said, while adding that most of the competitive advantages of banks revolve around dense urban cities. He foresees major banks stepping back from the distribution of third party products going forward as a result of more stringent compliance and regulatory norms. "There's no need to be intimidated by these 800 pound gorillas", Puri said on a lighter note.

When questioned about how UTI AMC is trying to establish a connect with the younger, more digitally native generation, Puri said that they have been working on their speed of service as well as the key messages that their brand is trying to communicate. "We feel very confident that we are connecting with the younger generation now", he said.

On the topic of the possibility of the upcoming IPO of UTI AMC, Puri dismissed it as hearsay, while expounding the benefits of such an event, were it to occur in the future. "The best Asset Management Companies are those that are governed as independent, standalone entities", Puri went on to say, while adding that this was his personal opinion and not representative of AMFI or any other institution. He predicted that in the Asset Management business in India, a number of spinouts into independent entities can be expected in the years to come.

On the future role of AMFI in building investor awareness, he mentioned that the first task at hand is to popularize the category 'simply through effective communication', moving away from the parochial concerns of individual AMC's. Puri cited the examples of campaigns revolving around the nutritional benefits of eggs and milk as products, which have been extremely effective.

To conclude the session, Alvares opened up the floor for audience questions.