The generation of Investor Awareness and the widespread proliferation of Mutual Funds as a product outside of the Top 15 (T-15) cities is a key priority for the industry as a whole.
In fact, SEBI rules demand that MF's set aside 2 bps, or 0.02 per cent of their net asset value per annum for investor education and other awareness initiatives. This works out to close to Rs. 300 Crores as on date.
An elite panel comprising of G. Pradeepkumar, CEO of Union KBC AMC, Jaideep Bhattacharya of Top3choice.com and Shyam Sunder, MD of PeakAlpha Investment Services assembled during the BW Mutual Fund India Summit to discuss the actual impact of Investor Awareness initiatives, and pool in ideas on how IFA's can use Investor Awareness as a route to building more robust businesses. Aashish P. Sommaiyaa, MD of MotilalOswal AMC returned to moderate this panel.
Pradeepkumar of Union KBC rightly observed that in spite of PSU bank promoted AMC's potentially sitting on a gold mine of customers in the form of the captive bases of their sponsoring banks, there is only one PSU bank owned AMC (SBI Mutual Fund) that has really achieved any significant scale. He mentioned that in order to work with a PSU Bank promoted AMC, one needs immense patience and a long term outlook.
Pradeep Kumar proudly mentioned that 65 per cent of Union KBC AMC's clients are first time investors, and his AMC has therefore been able to tap new geographies that were previously underserved. "Mutual Funds are a great product in terms of transparency, cost efficiency and regulation, but what we really need is someone who has the ability to sit across the table and explain to new clients that this is a great product", he said.According to Pradeepkumar, the key challenge is reach - the ability to get in front of large audiences and talk about the benefits of Mutual Funds. He also observed that it is a big challenge to get PSU bankers to move away from core banking and focus on distributing Mutual Fund products in parallel to their core activities.
Jaideep Bhattacharya of Top3Choice revealed that in a recent talk he had with a large group of PSU Bankers, they had unanimously declared that their biggest fear was that 'their large accounts would be poached away by the competition'. He advised that the only way to increase longevity of a client relationship is by solving real life problems by distributing two products to them - namely, insurance and mutual funds.
Bhattacharya stated that technology needs to evolve in order to empower and enable the Branch Manager of a PSU bank to become a fantastic investment advisor. He also expounded that it is the IFA with the last mile connectivity who is 'truly powerful' in this business, and that there are only 80,000 IFA's present in the country today - compared to 23 Lac insurance advisors and 1 Lac bank branches! "How, then, can the voice of the IFA be heard?" he said.
The number of new folios added in the Mutual Fund ecosystem is still dismally low compared to Insurance - and Bhattacharya attributes this to the fact that we are being unable to 'capture the imagination' of the customer and make him believe that the product is really going to solve a real life problem for him. He indicated that there is an immediate shortage of at least 1 Lac IFA's in the industry!
Shyam Sunder, MD of PeakAlpha stated that they actually acquired close to 90 per cent of their customer through Investor Awareness Programs, long before Investor Awareness even became a buzzword. "An informed investor is a delightful customer to have", said Sunder. He declared that Investor Awareness can be an important acquisition channel, but equally important in the scheme of things is 'Investor Education', which is akin to a 'continuing education' program. He advised IFA's to digress from a product led approach to creating investor awareness by asking questions and getting customers to talk about their problems instead - in other words, a bottom up approach.
Revealing that MoneyTalks (PeakAlpha's highly successful series of personal finance workshops) initially started off as a 'lazy way out' to acquire customers in bulk, Sunder said that these programs later evolved into a 'financial wellness' initiative offered by companies to their employees, both as a morale booster and a retention tool in a hypercompetitive talent market.
Sommaiyaa concluded the panel six minutes early and opened up the floor for some interested questions from the audience.
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