MFs outsource marketing in remote areas

Mutual fund houses are outsourcing their marketing to remote locations where they do not see their presence in the immediate future. The move has come at a time when opening of new branches is becoming economically unviable, thereby making players incapable of tapping potential investors in the hinterlands.

Failure to penetrate smaller towns and cities have prompted them to tie up with a Chennai-based firm Mutual Fund NAV Plus (MFNP) for pilot projects. MFNP has a network of 750 members having presence in over 500 cities in 26 states in India. It facilitates all categories of distributors. Amid high costs of the servicing platform it makes sense for MFNP to experiment with the model, say industry players.

So far, DSP BlackRock and IDBI Mutual Fund have appointed MFNP to market their products to distributors and conduct their marketing campaigns in smaller towns. Fund houses say the approach is an experiment and much will depend on how things pan out.

According to Govardanan Babu, director of MFNP, asset management companies (AMCs) can execute their marketing activities without opening a branch and moblilise business throughout the year.

Ajit Menon, executive vice president at DSP BlackRock, says: “This is basically to venture into remote locations where we do not have any branches. To start with, we have tied up with MFNP for two states - Andhra Pradesh and Tamil Nadu. The tie-up is for those remote regions where we do not have plans to put up our branches, say for 10 years, but have potential to add up Rs 100-200 crore in our assets.”

“It is a unique platform which will allow us to showcase our products and reduce our costs,” adds Menon. Distributors in these locations will be directly listed with the fund houses. The industry is undergoing challenges of shrinking distributors’ base and non-stop net outflow from its assets under management.

In return, fund houses will be paying minimum charges to the platform provider. “MFNP will do a fee-based marketing campaigns for us. If this idea works out, we will consider repeating it in our other zones as well,” says Menon.

“The style built for marketing campaigns will reduce mis-selling to investors. The sharing pattern for the development of new distributors will expand the market,” says Govardanan. According to him, AMCs can save more than 80 per cent of the maintenance cost of branches and manage their marketing channels by controlling the information that goes to distributors.