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After spending two decades in the MF industry, Sunil Subramaniam retired last month. He was among the most energetic and passionate CEOs who played a key role in the growth of the MF industry.
We spoke to Sunil to know more about his post retirement plans.
Post retirement plans
Sunil will take a short break to spend quality time with his grandchildren. However, the best thing is that he will continue to be an integral part of the MF industry.
Sunil has 40 years of experience in the financial services industry – 20 years in banking and 20 years in mutual funds. He believes that while he achieved three aspects of Ikigai – be good at what you do, be well paid and love your work in his previous role as MD and CEO Sundaram AMC, he will fulfil the fourth aspect of Ikigai i.e. giving back to society in his post retired life.
Most likely, he will educate distributors and investors and make complex things simpler for them.
Next wave of growth for the MF industry
Of the total 144 crore individuals, the MF industry has close to 5 crore investors. Sunil said that the industry has only scratched the surface.
Sunil said that many people prefer investing in bank FDs and real estate as they want safety. The MF industry has competitive products like liquid funds that can not only beat inflation but can outperform both bank FDs and real estate. And with an instant withdrawal facility, it can replace a savings bank account.
In fact, the worst performing liquid fund in the MF industry can beat bank FD by healthy margin, believes Sunil. Unfortunately, neither AMCs nor distributors promote liquid funds because of the lower margins.
However, the industry should first bring fixed income investors to the MF fold through liquid funds and gradually move to the risk hierarchy through other debt funds, hybrid funds and equity funds.
Another aspect is efficiently communicating the adverse impact of inflation to investors. Many people still do not understand how inflation can eat up their savings and investment. The industry should simplify the ill-effects of inflation to increase penetration of mutual funds, said Sunil.
Bringing MFDs to the MF industry
Sunil believes the following steps should be taken to broaden the distribution network.
- Existing distributors should encourage their second generation to join their business
- Existing distributors should become brand ambassador of their business by highlighting the positive aspect of their job among people including their family members so that people find this profession attractive
- SEBI should reintroduce upfront commission; however, for the new distributors for the first three years. This will help them set up business and weather the initial days challenges
Suggestion for SEBI
SEBI should set up a subsidiary called mutual fund regulatory and development authority (MFRDA). While SEBI has been doing a lot for the development of the industry, a separate regulatory entity having focus on mutual funds can bolster the growth of the industry, which is getting bigger day by day, feels Sunil.
Among the key roles of MFRDA could be regulating mutual fund distributors by licensing them, curbing mis-selling, punishing the wrong doers and more.
Further, SEBI should allow AMFI to allocate 25 bps of IAP budget for training and development of distributors.
Key lessons for AMCs
- Existing AMCs should refrain from launching too many sectoral and thematic funds. He said, “Launching NFO is good but only if it fills the existing gap in product offerings. In my view, timing is key in sectoral and thematic funds and investors can never get it right. Also, AMCs should increase the minimum ticket size to invest in sectoral and thematic funds to ensure that only serious investors and distributors participate in this.”
- AMCs should work towards simplifying product communication and focus more on giving solutions to investors
- AMCs should work in coordination to share their views with the regulator
Lessons for MFDs
- Sell NFOs only if your product adds value to client’s portfolio
- Shift investment amount in liquid funds if the goal is near or achieved
- Redeem money for clients at least one week before their important events like birthdays and anniversary. Encourage them to enjoy money and create positive memory
