Take us through the Reliance journey over the last 20 years?
The last 20 years have been fantastic. Two of the funds that we had launched then – Reliance Growth Fund and Reliance Vision Fund – have done exceptionally well over these years. These funds have multiplied the original investments by 80 and 42 times respectively, generating a compounded return of 25% and 21%, significantly beating their benchmark, and creating wealth for our investors. Not only these two funds, but our other funds have done well too.
We had commissioned a study through CRISIL to compare our composite fund returns. According to the report, Rs. 1 lakh invested in RMF schemes had grown to Rs. 19.86 lakhs in the last 15 years, whereas it had grown to Rs. 5.56 lakhs in Nifty and Rs. 9.08 lakhs in the CRISIL-AMFI Equity Fund performance Index, which can be considered as industry returns.
In the last 20 years, we have taken several initiatives and brought out innovative offerings across products, services and other aspects of our business. Our learning academy EDGE which offers investor awareness programs and a host of distributor training programs – Goal Planning Specialists, CFP, Digital Marketing, e-learning modules, Asia’s first and only mutual fund-linked ATM card, free life insurance with systematic investments to insure the financial goal, India’s first equity-oriented retirement fund are a few such initiatives.
For nearly a decade after its launch, Reliance was a mid-tier fund house. From there, it zoomed to the no. 1 position in just 5/6 years. How did this transition happen?
The industry AUM 10 years back was about Rs. 1.75 lakh crore and we were managing Rs. 15,000 crore. We had all the ingredients to support a rapid growth by then – a 10 year track record, established processes, well-entrenched distribution network and a good team. Markets were supportive, our fund returns were exemplary and it was a matter of time before we reached the No.1 position with the support of our partners and trust of our investors.
What are your key priorities today? What is your roadmap for Reliance MF for the next three years?
I am extremely positive about the prospects of the MF Industry. I had mentioned in public forums that the industry assets will be at least Rs. 20 lakh crore by 2020. I called it 20-20. Now, I believe this figure will be reached by 2018. The growth will be led by individual investors, whose participation will pick up significantly over the years. A large number of individual investors would be required to be advised and serviced by distributors across the country. There is tremendous scope and opportunity for everyone in this industry.
At Reliance Mutual Fund, we are consciously building our capabilities across various aspects of our business – investment management capabilities, robust processes, risk management & compliance practices, our reach and HR capabilities – to contribute and play a significant role in the ascent of the industry.
What initiatives are you planning to deepen your engagement with distributors?
We have been taking a lot of initiatives to engage with our distributors. We have developed a dedicated website for our distributors called Business Easy, which is powered by CRM, and loaded with several useful features. The website provides end-to-end support to distributors for managing their clients and employees. We also have an exclusive mobile app to engage with our distributors, using which we actively share information about markets, product and performance. Now, through the app, distributors can also initiate transactions on behalf of their clients, effectively helping them increase their reach by making operational issues involved in sourcing additional business convenient.
I had earlier mentioned about EDGE, offering various learning modules. We run a large Partners Recognition Program. We have taken significant family support initiatives like Free Life Insurance, Medical Insurance, Accident Insurance and Scholarships for Children, Forever Together touching lives of thousands of our partners and their families. The program also offers a unique retirement plan exclusively designed for our partners which endeavours to secure their future.
Also, our marquee initiative has been Trail Non-Stop, one of the biggest partner support programs whereby the family of the distributor partner would receive the last drawn trail commission in the event of the death of the partner before his normal working age – our commitment to our partners’ families.
For a population of 125 crore, we have just 15000 active ARNs. What needs to be done to expand the distribution network?
You are right. We would require a much larger distribution force to reach out, advice and service investors across our vast country. At Reliance, we have set-up a dedicated distribution channel to empanel and add new distributors, called as Retail Business Development (RBD). We have also taken initiatives to increase awareness amongst investors about the benefits of investing through distributors.
The industry provides tremendous opportunities for everyone. As I had mentioned in a public forum, Rs. 1 lakh invested in Growth Fund and held till now, would have fetched a trail commission of Rs. 4 lakh for the distributor, assumed at 1% trail. Like in any business, the benefits accrue over a longer period, and not over-night. The long-term benefits and therefore, the long-term orientation towards the business has to be propagated actively at all levels in the industry.
What needs to be done to attract more retirement savings in mutual funds?
Indians tend to save less towards explicitly meeting retirement goals. They consider their holdings in property, gold and fixed deposits as part of their retirement assets. If you consider only retirement assets, India’s retirement assets to GDP is one of the lowest in the world. We recently conducted a survey through IMRB to understand consumer perceptions around retirement. It has emerged that consumers consider retirement as the most important financial goal and many respondents also had expressed that retirement planning should ideally start early.
Traditionally, retirement has been synonymous with EPFO for the salaried segment and insurance for the public. Now, with the advent of NPS and mutual funds getting into the space, the penetration could improve from the current low levels. Marketing push for NPS, launch of more mutual fund linked retirement plans and steps towards increasing awareness will be required to attract more retirement savings.
Have IAPs started yielding the desired results? How has been the response to IAPs for Reliance MF so far?
We typically conduct about 2,500 IAPs in a year, covering nearly 75,000 investors across the country. We do these IAPs along with our advisors, who could subsequently follow-up with investors for conversions. Our experience has been good, particularly with advisors who conduct IAPs on a regular basis and who are persistent with their efforts. In such cases, conversions tend to be around 20-25%.
The Sumit Bose committee has recommended a reducing trail model for distributors. What are your views?
We are clearly against this proposal. We and have written to the regulator and AMFI, as part of providing our feedback on the various proposals made in the report. Mutual funds are market-linked products, and hence investors would require regular hand-holding and advice. Intermediary's role is crucial to spreading awareness about the financial products and hence enhance financial inclusion. To appropriately incentivize distributors and align their interests with those of clients, it's essential to maintain an appropriate trail commission structure.
