If we get the right opportunity at the right price, we are open to the idea of growing inorganically, says Anutosh Bose, Chief Operating Officer, LIC Nomura Mutual Fund.
Investing in mutual funds involves a lot of paperwork. How can the industry move towards paperless investing?
Firstly, the industry needs to talk to other regulators and agree on a common documentation. In US, you have a security card which is accepted everywhere. We thought Aadhar would be equivalent to KYC. However, that hasn’t happened yet. Once that happens, some amount of paperwork will be cut down. To comply with Anti Money Laundering rules, we have to do some due diligence to comply with Anti money Laundering Rules. Thus, some amount of documentation will always be required.
Do you feel that single KYC requirement for investing in all SEBI regulated products has helped MF distributors?
It has helped the industry and more importantly investors. However, there are still some challenges between the KYC Registration Agencies (KRAs).
What proportion of investors today invest through AMC websites or online? Do you think investors are comfortable investing online?
The industry gets 8% of inflows from online transactions. The number of transactions are growing. The younger generation is comfortable investing online. The ticket size is small but the number of transactions are growing. Many fund houses are providing online investment facility through their websites and through mobile phones. We are also planning to launch our mobile application soon. These initiatives will help increase investor participation.
The industry receives a majority of complaints relating to 'data correction in investor details' and 'discrepancy in account statements' category. How can fund houses eliminate these errors?
Majority of fund houses have outsourced this activity to registrars. Registrars need to ensure that they give quality service to investors. If they are not up to the mark then fund houses should penalize them. Earlier sourcing phone number, email address or date or birth of non-minor investors was not that important. With changing times these data points have become extremely critical. R&Ts play an important role in this area.
What are the reasons for the drop in investor complaints last year?
It is purely because of less number of transactions. The volumes have dropped. If volumes are high, there will be more complaints. I don’t think the quality of investor servicing has improved overnight.
Marketing funds involves upfront costs. How is LIC Nomura trying to be cost efficient to make sure your bottom line is protected?
It is like an operating expense. In India, unfortunately, our accounting practices don’t allow us to amortize the expense incurred in the first year over the life of the product, which is allowed internationally. I think we should also follow this international practice. Currently all the expense incurred in marketing funds has to be written off in the same year which takes a hit on the balance sheet. Whatever you earn next year is your profit.
Mutual fund is an intangible product. Apart from providing returns, how can AMCs ensure that investors have a better experience with the fund house?
Financial literacy in India is low. Investors don’t have brand consciousness when it comes to mutual funds. Not many people go to shopping malls to buy branded clothes. How many people buy Tag Heuer? Majority of people would buy a watch which looks good and is economical. Mutual fund investors are only concerned about how much returns they get.
There have been many regulatory changes in the industry in the recent past. Does it increase the cost of compliance for fund houses?
Yes, the cost of compliance has increased but the industry is to be blamed for that. Had the industry taken some steps ten years back the regulator would not have been so hard pressed to issue so many regulations.
Do you feel that MF Utility can be a game changer for the industry?
It is hard to predict its success. We can’t compare it with dotcom or internet. It may not be a revolutionary change for the industry. The success of MF Utility lies in centralizing everything. Mutual funds are not allowed to use celebs to market their products. Our pull is only returns. The role of advisors is important to make it a success. Very few people realize the importance of MF Utility. AMFI needs to educate distributors on the benefits of this portal.
LIC is the largest insurance company in India by far. How can it be among the top players in the mutual fund industry?
LIC is the largest insurance company because it is the first insurance company in India. It is like UTI. We are not in the race to be among the top five players. Our motto is to provide superior returns and quality investor service. We are here for the long haul.
Is LIC Nomura open to inorganic growth?
Yes, if we get the right opportunity at the right price we will definitely consider it.
What are the challenges in communicating/marketing mutual funds among people?
Going by the current advertising guideline, it looks like the communication is meant only for informed investors. It is difficult to communicate about mutual funds to the uninformed people. Most people don’t understand what is point to point return, CAGR and annualized returns. It may be because of our education system.
How are you expanding your distribution network?
We have done many rounds of educational meetings with LIC agents. Many of these agents had dropped out of business because of bad market conditions. We are persuading them to take up mutual fund advisory again. We are also trying to enroll the new cadre of distributors. We have presence in 500 cities. We are trying to focus on one city at a time. Recently we have started getting in touch with our investors who had invested with us in 1988-89.
Your favourite book and why would you recommend it to others?
I read a lot of management books. I liked the book ‘Where are the customers’ yachts?’ It exposes the folly of Wall Street in an interesting way. If a mutual fund/hedge fund is generating returns for investors then investors should own yachts not the banker or fund manager. I also liked the book ‘In search of excellence’.
