Mfs chant investor awareness mantra

Amid regulatory changes which have led to a drop in fund flows and record redemptions on market peaks, fund houses are rolling out investor awareness programmes as well as creating teams of trained financial advisors to grow their business in the long run.

Need for financial advisors
Ever since the market regulator banned the entry load on equity mutual fund schemes, the distributor fraternity has been less interested in selling mutual funds. The reasons behind this are the incentive squeeze and the need to charge the customers for advice. The role of the financial advisors becomes important as mutual funds are still a pushed or a sold product. Moreover, lack of awareness about mutual funds among the investor community is a big barrier preventing penetration. Trained advisors are gaining importance on the back of the regulator’s concerns on miss-selling of financial products without considering the risk appetite of the investors. Fund houses say that upfront commissions to the distributors from their own pocket is not a viable proposition.

 

Dwindling assets
Out of the total assets under management of the fund industry, equity assets make up less than a fourth of the size. The rest comes from debt schemes dominated by corporates and financial institutions. It is the equity segment and to an extent monthly income plans (MIPs) where the retail investors’ participation is the highest. However, with dwindling number of equity folios, which are largely retail, fund houses are trying to reach out to investors through their roadshows across the country.

Investor awareness
Fund houses along with the Association of Mutual Funds in India (Amfi) have started investor awareness programme, especially in tier-I & II cities. Under these programmes, financial advisors and distributors are also being trained. Fund houses including Reliance, UTI, ICICI Prudential, Birla Sun Life among others have started taking concrete measures to expand their reach and spread awareness. For instance, UTI Mutual Fund this year launched one of the largest investor education initiative under the name “Swatantra” for creating awareness about the concepts of financial planning and benefits of investing in mutual funds in over 300 cities in the country.

In line with UTI MF, SBI MF too started its investor camps from July in 100 locations in the country. Reliance Mutual Fund conducts around 75-100 awareness programmes every month. Sundeep Sikka, CEO, Reliance Mutual Fund, says, “There is a large opportunity to distribute mutual funds in the rural and semi-urban centres. These programmes are like work-site presentations where we give people basic knowledge of mutual funds and their benefits.”

Though the positive results of all these activities are yet to be seen, investment through systematic investment plans (SIPs) has shown some positive trends. Statistics available from CAMS show that in the last couple of months, fresh SIP registration is on the rise. For instance, in August the new SIP registration numbers zoomed past 300,000 against 100,000-200,000 a month ago.

Nimesh Shah, MD, ICICI Prudential Mutual Fund, says, “I do not expect to make money in all my businesses. The retail equity segment is a challenge but we would continue investing in it no matter whether we make money out of it or not on a monthly, quarterly or yearly basis.”