Rajan Krishnan: What is the most important area or direction in which your fund house is currently working on?
Swarup Mohanty: We just completed 18 years of AMFI. In the AMFI AGM, we were requested to start behaving like adults. Over the 15-20 years the NAVs of equity funds have been travelling on triple digit path. The need of the hour is not product innovation but it is about product conviction. We don’t seem to be convinced about our own products. It’s time to fall back on your core. Diversified equity funds seem to be doing phenomenally well and the product seems to be growing more attractive. So we would like to bring conviction to the table when we talk to you about our products and I’m sure advisors would take a cue from that and eventually investors will follow.
Ajit Menon: From the perspective of DSP BlackRock, if I were to define this challenge, I think a lot of us tend to get into generalizations. This is where we make mistakes. You can define the problem in multiple ways. If you look at the complexities of India it is not an easy task. From our AMC’s perspective, we cannot be everything to everybody. The problem is same at the advisory level also. They take every customer. Being everything to everybody is impossible. You have to play to your strengths and figure out what segments you want to be in.
Rajan Krishnan: Does it restrict the market?
Ajit Menon: Geographical expansion involves multiple things. We are trying to empower our advisors (especially in the IFA space) with all the value additions that we can offer to help them grow the business. That’s the route that we would like to take to grow the business.
D P Singh: We believe that product simplicity is the mantra. We don’t need innovative products to expand the market. We need to expand the market through simple products like liquid funds. We are losing lakhs of folios every month. We need to retain these investors. Technology has to be exploited to the fullest. Today millions of people are using mobile phone so why can’t they use this technology to make investments? But we have to make the process simple for investors to invest. In India most of the people falling in the higher tax bracket are our potential customers today and reaching out to them is a challenge. That can be done through by adopting some of the technological advancements happening in the banking sector. We are trying to get new customers to the industry.
Karan Datta: I’m going to start by saying something controversial. Who are we to say that people who have put Rs. 60 lakh crore in bank deposits are uneducated and they need to be educated to make them invest in mutual funds? Even after 20 years we have built Rs 1.50 lakh crore of equity assets. I’m coming to the fundamental issue of what our investors are trying to tell us. They are telling us that they hate volatility and love predictability. In the AMC business we don’t tend to hear them very well. The only way to address this is to give them a ride which is less violent. Either the AMCs have to come up with asset allocation products or advisors should practice goal based advising. There is no third alternative in my mind.
Kailash Kulkarni: We are relatively new in this business. We really want to keep it simple. We have tried to do three things in this short period of time. We have tried to get new customers through liquid funds. We understand that it may not make sense for advisors from a remuneration perspective. We have launched a multi scheme SIP where while selling equity SIP advisors can also collect a liquid SIP in the same application form. This way investors will be more comfortable listening to your advice. We have launched a new investor education initiative in multiple languages. We have launched five short films in six languages (Bengali, Hindi, Tamil, Guajarati, Marathi and English) languages on you tube. The message is very simple and easy to understand. So if a distributor in say Madurai wants to get 100 new investors in the industry can send a link of our Tamil video to those investors. So we are trying to reach as many people as possible.
Sunil Subramanian: We are missing a point here and it’s about our existential issue. We are in the job of providing solutions to investors. Products and channels are only methodologies to deliver. For providing solutions you have to understand customer’s needs. That’s where the second issue comes. Investors are driven by emotion. You have two emotions which drive people’s investment decisions which are fear and greed. In some way our industry has positioned itself as only catering to the greed. The need for safety is paramount in investors mind. We are trying to expand the greed pie but that we would self-limiting. We have to redefine ourselves as solution providers. So we at Sundaram have started to redefine our business.
Rajan Krishnan: Isn’t there a need for urgency to grow the market? All that you have said is true and has to be addressed. But is there something which can be done to see a change in the next six to eight months?
Kailash Kulkarni: The investors are confused today. If we go to investors with new ideas to try and grow our industry then possibly, you are sending them more new messages which would further confuse them. We need to package products in a different manner to address it to savers. There are investors who have tasted mutual funds but can we go beyond that? This will help industry grow in the next six to twelve months. But if we do something radically different then there is a chance of confusing investors.
Rajan Krishnan: If we take it from there and say that products and channels are just delivery mechanisms and the message has been consistent in this panel. Can the panelists delve more into specifics?
Karan Datta: Axis MF has added 1.50 lakh folios in ten months. We can always argue that it’s not large. Contrast this to the industry and we see that we have lost 15 lakh equity folios. I’m not trying to promote anything here but trying to get the thinking going. Investors are not asking for superlative numbers. We are so caught up in life about being the best performing asset managers but it has no relevance in the life of investors.
Sunil Subramanian: From a quick fix angle, I think the regulator should allow us to publish a band of indicative yield on FMPs. We know that FMPs are giving better returns than bank deposits but it’s all hush-hush. Today we depend only on distributors who go only market this product to HNIs.
D P Singh: If we are talking about the regulator then there are so many things. KYC is the biggest deterrent for investors.
Sunil Subramanian: The bank does the KYC and the industry gets all the money through banks so why duplicate KYC?
Swarup Mohanty: Let’s face the reality. The reality is that we are in the business of financial advising and it is the most boring and disciplined thing to do. The more boring you make it the more money you make. Our job is not to bring excitement to anybody every day. Our job is to create wealth and that is very powerful thing that we do. We have fantastic products delivering good returns that the industry could have dreamt of. Investors find mutual funds more risky than stocks. That’s where we get stuck. I’m not ok with this concept of profit booking in mutual funds. You have hired a fund manager to book profits. Every redemption made in equity fund is wrong unless there is a need or goal behind that redemption.
Rajan Krishnan: I want to bring Ajit into the discussion. DSPBR has been working on the women segment. It would be interesting to know more about it.
Ajit Menon: To go back to what I said earlier, you cannot be everything to everybody. We are telling IFAs that you need to have clear segmentation of clients so that they are able to match the level of service that they provide with the clients that they service. So as a manufacturer we looked as women as one of the segment where we can do something. We started with conducting a survey which covered around 5000 women across 14 cities. The facts were intuitive in the sense that only 23% of working women actually decide about investments. In the non-working segment, it is only 10% who took financial decisions. What was interesting is that 63% of women wanted to know about investment products and I think that’s an opportunity. It’s clearly an opportunity for women advisors because of the empathy that they can bring into the conversation.
Recently Devdutt Pattnaik was addressing a group of advisors. He said that you guys are running after Lakshmi (Hindu Goddess of wealth). Please understand that your clients are running after Durga (Mother Goddess) which is safety. So we are trying to push equity to people who are looking for safety. But he ended very well by saying that the root for both goddess is through Sarasvati so you better get your knowledge quotient up first – both for your investors and yourself.
Moderated by Rajan Krishnan, Mentor, Cafemutual and ex-CEO, Baroda Pioneer MF.
