We began 2017 in the backdrop of demonetization. There was hope and promise of mutual funds being one of the beneficiaries as non-financial investors ventured out for better product alternatives and returns. And what a splendid year it has been. Our industry has seen an encouraging growth in overall AUM with record flows in equity category. Investor folios and cumulative SIPs are at an all-time high and incremental growth continue to be strong. Healthy market returns on the back on lowering small savings rate, sluggish real estate and gold market have helped in this transition to financial assets.
We usher in 2018 with greater optimism for the MF industry and its continued growth with both the manufacturer and the distribution gearing up to participate in this exciting journey. As manufacturers, the coming months will bring greater clarity on product positioning due to consolidation of schemes (introduced by SEBI). This move will ensure that schemes of similar variety are on a level playing field.
It would be far easier for distribution and end investors to now distinguish the scheme objective, performance and take an informed decision on investing. We could also see a slew of NFOs as manufacturers launch products in such categories where they were not present earlier.
The AMFI campaign on ‘Mutual Fund Sahi Hai’ has helped in creating immense awareness about mutual funds as a concept. SIP / STP as an efficient tool of investment has been well accepted and distribution will continue to keep using it for investments and help investor iron out volatility.
Investor interest for alternates like portfolio management schemes, AIF will continue to gain the limelight in the HNI space. Customer experience will be another area where manufacturer and distribution will continue to invest. Certain regulatory mandates for e.g. Aadhaar linking will continue to put load on the system. But we hope that as an industry, we shall see an efficient way to fulfil this exercise.
We continue to be very optimistic on the distribution side of the mutual industry. Distributors have and will play a pivotal part in the industry growth. In spite of other emerging forms of technology led distribution, physical distribution still accounts for a large share of the total volume. Optimism within the industry is at a high, new customer acquisition is a regular affair. With distributors pursuing the approach of prudent advice and execution of what is right for the customer client confidence in the overall industry continues to grow.
Technology will play a key part in the industry’s growth and this trend is growing stronger with every passing day. Mutual fund awareness continues to multiply thanks to social media. “Mutual fund” has been one of the most searched words in the investment category. Distribution has been embracing technology albeit in parts. Business models are moving from one-to-one to one-to-many. Distributors can use technology in an integrated fashion to reach out to investors to communicate, transact and can be complementary to the offline business model. A knowledge based technology presence will strengthen one’s brand, reach and the recall.
New players like payment banks, PayTm will make an entry into distribution. Given their scale of customer base, these players will help expand the market both in depth and reach. This can help traditional distribution as many such first time investors would eventually want to migrate to advice. Banks and national distribution will continue to expand their footprint through branch network and on line options to reach out to a larger universe of their customer base. Few private banking outfits have been exploring the external wealth management model, one could see some formalisation on the process for adopting this model. IFA as a segment continues to grow at an encouraging pace. We did see some consolidation in distribution, especially amongst IFA to create larger entities with a few successful models. We believe this pace will pick up in coming times. Distribution will look at expanding the product suite beyond mutual funds and insurance to counter client loss to NBFCs, banks and broking and position themselves as a one-stop shop for all financial needs.
Our business is of partnership between the manufacturers and distributors. They have to coexist. We bid goodbye to a strong 2017 and welcome 2018 with an even greater optimism. Mutual alignment between the manufacturer and the distribution, while keeping the end investor in mind, will see us scale new heights. The coming year would be that of embracing technology for a better customer experience in helping them achieve their financial goals, reach, ease of doing business, adapting to newer distribution models and improving productivity.
Manish Mehta is the National Head – Sales & Distribution Alliance, Kotak Mutual Fund.
The views expressed in this article are solely of the author and do not necessarily reflect the views of Cafemutual.