What if there was a cricket match between the distributors of mutual funds (MF) and insurance sales agents? I happened to ask this question to an experienced veteran CEO from the MF industry. He smiled and said, “It is an uneven playing field. On one side, you have a team of players from a relatively younger industry (mutual funds) who are eager to showcase what they can do, but their playing actions and strategies have already been dissected (Read: Transparency) by the opposition. On the other side, you have a bunch of experienced and seasoned professionals (insurance) about whom very little is known. The fate of the match will be decided even before the first ball is bowled!”
Now with the Securities and Exchange Board of India (Sebi) trying to bring in more transparency for the mutual fund investor by making it mandatory for distributors to declare their commission income to the buyer of the fund, the MF agent is not at all happy. Mint, a newspaper, has reported that some distributor associations have launched a protest drive against this proposal.
While most agree that making the mutual fund business more transparent will serve well for the mutual fund buyer, the distributors feel that this is not a level-playing field. Insurance agents and mutual fund agents go for the same pie of savings of the investor and with insurance agents not disclosing their high commissions and having a one line sales pitch always end up getting the customers savings.
Let us look at the communication part. Says Vikaas M Sachdeva, CEO, Edelweiss MF, “It is the ability to simplify and communicate ‘a benefit’ which leads to the growth of the industry. Any other information usually adds to the clutter.”
To take that a little further, let us see some financial products which have attracted a lot of money. For example, a fixed rate of return is the USP for a fixed deposit. The entire communication is built around this piece, not unnecessary information like how strong the banks financials are.
If one looks at the insurance industry, an insurance agent simply goes, “What if you are not around in the next few years or you die in an accident? Who will take care of the family?” Here the sales agent is using negative terminology to conclude the sale and this ‘scare tactic’ has worked well over the last 20 years. (A friend of mine became an insurance agent at the age of 20 and asked all of us to buy a policy because life was uncertain. “Tu kabhi bhi mar sakta hai” worked.)
