MFs cheer Sebi's move to allow celebrity endorsements

It was a long-standing demand of Amfi to help generate a better connect with investors

The Rs 16.5-lakh crore domestic mutual fund (MFs) industry has welcomed Sebi's decision to allow celebrity endorsements, with industry body Association of Mutual Funds in India (Amfi) planning to come up with a roadmap soon. Just like other financial products such a banking, insurance and home loans, MFs too will be able to rope in big stars to create awareness and increase the reach of their financial offerings.

Celebrity endorsement was a long-standing demand of Amfi to help generate a better connect with investors. The move, however, faced resistance due to fears of misselling.

However, with stringent rules in place to avoid misselling, industry players say the latest move will help improve the penetration of the MF industry, which is currently accessed by less than 2% of the country's population.

As celebrity endorsement is only allowed at the industry level to begin with, the issue will be handled by Amfi. Further, insiders say the investor protection and education fund could be used for such endorsements. The issue could be soon taken up by Amfi.

"There have been several instances where the funds meant for investors education remain partially unused. This can well be used for the industry level endorsement. Though so far at Amfi it has not been addressed post Sebi's meeting last weekend. But soon we would meet to have a roadmap," said an industry CEO, who did not want to be named.

According to Hemant Rustagi, CEO, Wiseinvest Advisors, says, "Endorsement through well-known and influential celebrities is an effective way to connect with the people much faster. Reaching out to investors is a challenge. Such endorsements will help generate interest in MFs."

However, experts feel that it will be too early to expect that mutual funds will overnight turn into a 'pull' product from a 'push' product.

Manoj Nagpal, CEO, Outlook Asia Capital, says, "With celebrity endorsements, the engagement level between the asset management companies (AMCs) and the investors is likely to increase. Whether it increases the sales or not, that's a different matter, but relevance of a mutual fund as a brand certainly would rise. Thrust should be on how to make mutual funds popular."

Increasing popularity and creating awareness of MFs have become important given the changes to commission structure.

Earlier, A Balasubramanian, CEO, Birla Sun Life Asset Management, had said that mutual funds deserved a bigger endorsement and celebrities did have a better connect which can help the sector. "The industry has the potential to become much larger than even the banking sector and this move will give a further boost for expansion and investor awareness about mutual funds."

According to Sundeep Sikka, CEO, Reliance Mutual Fund, "Given the poor penetration of a mere 2%, mutual funds needed an additional push to reach out to investors. This move will help propel sector's growth."