on Friday, 24 August 2018at Lalit Great Eastern, Kolkata

Merchants' Chamberof Commerce & Industry

Mutual Funds: Securing India’s Financial FutureMutual Fund Forum 2018

A Report

The ‘MCCI Mutual Fund Forum 2018’ was organised with prominent Policymakers and Industry Leaders with an

aim to trigger meaningful deliberations on

developments and trends in the Mutual Fund Industry. The Forum could also lay

down a possible future road map for the Mutual Fund

Industry in India.

MCCI Mutual Fund Forum 2018 1

Ramesh Agarwal, President, MCCI delivering the welcome address. Seated (L to R) Souvik Banerjee, DG, MCCI, S. Madhusudanan, Regional Director – Eastern Region, SEBI, G. Pradeepkumar, CEO, Union Asset Management Co. Pvt. Ltd., N. S. Venkatesh, CEO, Association of Mutual Funds in India (AMFI), Prem Khatri, Founder & CEO, CAFEMUTUAL, Saugata Chatterjee, Co – Chief Business Officer, Reliance Nippon Life Asset Management Limited, Sasanka Sekhar Nundy, President, Independent Consultants & Advisors Association (ICAA) and Smarajit Mitra,

Chairman, Standing Committee on Banking, Finance & Insurance, MCCI

MCCI organised the MCCI Mutual Fund Forum 2018 with the theme ‘Mutual Funds: Securing India’s Financial Future’ on 24 August 2018 at the Lalit Great Eastern, Kolkata.

Inaugural Session - ’Indian Mutual Fund Industry: Current Trends, Challenges & Possible Growth Path’Session Focus:

• AssetsUnderManagement(AUM)asonApril30,2018stoodatRs.23.26lakhcrore.AUMoftheIndianMFIndustryhasgrownfromRs.5.05trillionason31stMarch2008toRs.23.26trillionason30thApril2018,morethanfourandhalffoldincreaseinaspanof10years

• TheIndustry’sAUMhadcrossedthemilestoneofRs.10Trillion (Rs.10LakhCrore) for thefirst time inMay2014andinashortspanofaboutthreeyears,theAUMsizehadincreasedmore than two fold and crossed Rs. 20 trillion(Rs.20LakhCrore)forthefirsttimeinAugust2017

• TheIndustryAUMstoodatRs.23.26Trillion(Rs.23.26

LakhCrore)ason30thApril,2018.ThesectorisexpectedtoregistercontinuedgrowthmomentumanditcanbeamajorforceinSecuringIndia’sFinancialFuture

• However,inspiteofphenomenalgrowthofMutualFundindustryinlastdecade,therearestillsomekeychallengestothegrowthofthisSector.Lowconsumerawarenessandtrust, limited distribution network restricted to top fewcenters, lack of innovation in products, lack of investorgrievanceredressalmechanismsystem,etc.

• Despitechallenges,theMutualFundIndustryisexpectedto carry forward its growthmomentum through continuedgrowthinfinancialsavings,improvementinpenetrationofMutualFunds,expansionbeyondtop15citiesandproductinnovation&technologyadoption

• What are the steps that need to be taken to facilitatesustainedexpeditedgrowthoftheMutualFundindustry?

• What is the roleofSEBIandAMFI in theMutualFundIndustry?

MCCI Mutual Fund Forum 2018 2

The Inaugural Session was addressed by the followingspeakers:

WelcomeAddress:Shri Ramesh Agarwal, President, MCCI

Shri Sasanka Sekhar Nundy, President, IndependentConsultants&AdvisorsAssociation(ICAA)

Shri Saugata Chatterjee, Co - Chief Business Officer,RelianceNipponLifeAssetManagementLimited.

Shri Prem Khatri,Founder&CEO,CAFEMUTUAL

ShriG.Pradeepkumar,CEO,UnionAssetManagementCo.Pvt.Ltd.

Shri S. Madhusudanan, Regional Director-Eastern Region,SEBI

GuestofHonour:Shri N. S. Venkatesh,CEO,AssociationofMutualFundsinIndia(AMFI)

Vote of Thanks: Shri Smarajit Mitra, Chairman, Standing CommitteeonBanking,Finance&Insurance,MCCI

Shri Ramesh Agarwal, President, MCCI in his welcome address spoke about the Rs. 23.06 trillion Mutual FundmarketinIndiaason31stJuly2018.Hementionedabout‘Mutual Funds Sahi Hai’ campaign, based on SEBI’sinitiativetoprovideawareness.Hespokeaboutthelackofhealthyparticipationbeyondthetop15locations.

IndialagsmostmajornationsintermsofAUMofMutualFunds,asapercentageofGrossDomesticProduct(GDP).InIndia, with 42 Mutual Fund houses managing assets to the tuneofoverRs.23laccrore,theassetbaseofMutualFundsasapercentofGDPisjust11p.c.whiletheworldaverageis62p.c.ItistruethatMutualFundshavenotyetbeenabletogainasignificantshareofinvestors’walletmainlyduetolackoffinancialawarenessamongamajorsegmentofthepopulation.Moreover,thereisalackofhealthyparticipationfrominvestorsbeyondtheTop15 locations.Asperrecentstatistics,more than80 p.c. of theMutual Fund industry

Ramesh Agarwal, President, MCCI

Sasanka Sekhar Nundy, President, Independent Consultants & Advisors Association (ICAA)

AUMcomesfromthetop15cities.

SEBIhastakenaproactiveregulatorystancetoensurethat the industry grows in a sustainable manner. Theregulations have been nuanced in the way that it bringsmore transparency and disclosure from the Mutual Fundhousesandbenefitstheinvestors.Thesuccessful‘mutualfundssahihai’campaignwasbasedonSEBI’sinitiativetoprovideawareness.

Goingforward,thereisnodoubtthattechnologywillplaythemostimportantroleinincreasingthesizeoftheMutualFund industry. Many experts believe that Mutual Fundoperationsaremovingtowardtotaltechnologydependence.

By 2021, 64 p.c. of India’s total population will be intheworkingagegroup.Millenialsarethelargestandfastestgrowingadultsegmentacrosstheworldandtheyrepresentthegreatestopportunityfortheassetmanagementindustry.

86p.c.oftheAUMofMutualFundsisconcentratedin8statesandUnionTerritories.Maharashtra leads thepack,followedbyDelhi,KarnatakaandGujarat.

Shri Sasanka Sekhar Nundy, President, IndependentConsultants & Advisors Association (ICAA) said that the MutualFundindustryisatacriticaljunctureandfinancialinclusionhasjuststarted.Itisourjointresponsibilitytotaketheindustrytothepublicandmakethempartners.

Theroleofallstakeholdersisdefined.Ifwedoourwork,thenthecountrywillnothavetorelyonforeigncapitalfortheNation’sgrowth.Whenthishappens,wecanproudlysaythatwearefinanciallyindependent.

There will be issues and areas of disagreement inan industry as large as the Mutual Fund industry. Allstakeholderscanvoice their opinion.Disagreementsneedtoberesolved.TheobjectiveofthisSessionistobrainstorm

MCCI Mutual Fund Forum 2018 3

Prem Khatri, Founder & CEO, CAFEMUTUAL

Saugata Chatterjee, Co – Chief Business Officer, Reliance Nippon Life Asset Management Limited

ideassothatpeoplebenefit.

Much earlier, there was only UTI in the field, fixedincome productswere popular and penetration ofmutualfunds was minuscule. Then, came the boom in equityproducts. However,we still have to transform from beingsavers to becoming investorswhichwill be possiblewiththeparticipationofall.

Shri Saugata Chatterjee, Co - Chief Business Officer,RelianceNipponLifeAssetManagementLimited said that theGovernmenthasbroughtinenablerswhichhaveallowedwealth creation.Assets in theMutual Fund industryhavegrown multifold and the industry will grow by leaps andbounds. TheMutual Fund industry currently has an AUMofRs24laccrorewithaninvestorbaseof2crorepeopleholdingabout7.5crore foliosatpresent. In recent times,equityhasbeenthebiggestgrowthdriveroftheindustry.

The AUM of the industry have grown 2x in the last 3yearsandalmost5xinthelast10years.TheMutualFundindustryhasenjoyedgrowthof30p.c.perannuminthelasttwoyears.ItisahighpotentialforgrowthindustryandiftheindustrygrowsataCAGRof20p.c.to21p.c.,itcanacquireanAUMofRs100laccroreinthenext10years.SIPisastrongenablerfortheMutualFundindustry.

ThepenetrationoftheMutualFundindustryintermsofAUM/GDP is lowatonlyabout10p.c. in India. Inothercountries,AUMis50p.c.to100p.c.ofGDP.

ThepopularityofMutualFundsisspreadingfromthetop15 cities to the top 30 cities. However, the growth in thelargest15cities ishigher than the industry growth rates.The ruralpopulationhasa largeproportionofpeoplewhoaresaversbutnotinvestors.Theindustrywantstogeton-boardasmanyretailclientsasearlyaspossiblesothatthey

mayenjoythebullruninequities.

The factors favouring the Mutual Fund industry arethe largepopulationandthesizeablesavings.TheMutualFund industry has to transform fromacquiring customerstoincreasingshareofwallet;fromjustsellingproductstoprovidingsolutionsandfromdealingwiththeindividualtomanaging a family’s financial health. Investor educationandhand-holdingtheinvestorintimesofmarketvolatilityareimportant.

TheMutualFund industryneedsto leveragethedigitalmediumtoexpandreach,buildefficiency,sethighservicestandard,maintain connect and enhance knowledge. TheissueisthateveryoneissavinginIndiabutcanthesavingsbeconvertedintoinvestmentintheMutualFundindustry?

Shri Prem Khatri, Founder & CEO, CAFEMUTUAL said thatiftheMutualFundindustrygrowsataCAGRof17p.c.thenitcanreachasizeofRs50laccrorein5years.Inordertogetthere,theindustryneedstodothefollowing:

- Adopt investor education based on consumerinsights- Expandandmodernisedistribution- Woothecustomer- Simplify products and never engineer. Currently,

MutualFundproductsareoverlyengineered

Inasense,investinginMutualFundiscontrarytohumannatureasitpostponesgratificationanditisdevoidofanysensoryoremotionalpayoff.Also,wearenothappymakingdecisionswhichmakeusfeelinadequatesuchasinvestinginaMutualFund.Furthermore,MutualFundproductsarecomplicatedandcomplex.Theyofferintangiblebenefitsandprovideuncertainoutcome.

Thecurrentstateof investoreducation ispreaching to

MCCI Mutual Fund Forum 2018 4

theconvertedwithMutualFundsunfortunatelyengaginginsurrogateadvertising. The recommendedstateof investoreducationincludesafocusonexpansionofcategory,runningcampaignsforspecificsegmentsandbuildingonprinciplesofbehaviouralfinance.

TheMutualFund industryneedstoexpanddistributionbysettinghighstandardsandendowingtheprofessionwithprestige.Infact,beingadistributorshouldbeawonderfulprofessionofchoice.Distributioncanbemodernisedwithasegmentationandnicheapproachandbyshiftingfromnewclientacquisitiontohigherengagement.

Thisisnottheageformassmarketing.Today,everybodyhasadifferentrequirement.IntheUS,onemutualfundonlysells todentistswhodocosmeticsurgery.This is theageofspecialisationandwecanmeettheneedsofcustomerswhenwespecialise.Also, Independent FinancialAdvisors(IFA)need tobe inconstantengagementwithclientsandtheymustintensivelyengagewithcustomers.

While wooing the customer, the distributor needs toremember‘differentstrokesfordifferentfolks’.MutualFundproductsneed tobesimplified.Toomanyproductchoicescreateconfusioninthemindoftheinvestorandinfacttoomanychoicesbaffleandimmobilisethebuyer.Theevidenceismixedonhowdifferentcategoriesaddvalue.

ShriPremKhatrisummedupbysayingthatdistributorsshouldbuildonconsumerneeds,distributionmustbecomea prestigious profession, different audiences must beattractedwithdifferentmessagesandMutualFundproductsmustbesimplifiedandstreamlined.

G. Pradeepkumar, CEO, Union Asset Management Co. Pvt. Ltd.

Shri.G.Pradeepkumar,CEO,UnionAssetManagementCo.Pvt. Ltd. said that assetmanagement companies areluckytohavewealththatisreadytobedeployed.Inotherwords,theyareattherightplaceattherighttime.TheMutualFundindustryhasgrown3xinthelastfiveyears,andthe

bulkofwhichhasbeencontributedbytheIFAcommunity.NoIFAwillknowinglymis-sellastheyareconnectedtothecommunityinwhichtheysell.

PeopleinvestinMutualFundstocreatewealthandthefocusshouldbeonthis.Thebenchmarksarenotimportant;what matters is the end result and whether we are adding valueforourcustomers.

TheAUM/BankDepositsisonly20p.c.inIndiabutitisashighas200p.c. in theUS.Similarly,AUM/GDP isonlyabout12p.c. in Indiawhereas theaverage forothercountriesisabout60p.c.

Growth will not come from only chasing existingcustomers. You have to reach out to new investors forwhichwe needmore advisors. In fact, we need 5xmoredistributorsthanwehavetoday.Ifwearetogofrom1lacto5lacdistributors,thenweneedmorewomendistributors.Thevisionforthefutureenvisages40strongMutualFunds(insteadofthe10strongMutualFundsthatwehavetoday).

Customer acquisition happens most effectively whenyouhaveahumanface.Investorsneedtoseeafacethattheycantrustandleanonthatpersonastheyareassigningtheirlife’ssavings.Technologyistheretohelpus.

Ordinary retail clients need help from an advisor.Direct clients, on the other hand are good in the case ofsophisticatedclientsorinstitutionswithskillsandin-depthknowledgeofthemarket.

The current expansionary Mutual Fund industry hasa lot to offer to everyone. There is room for every AssetManagementCompany (AMC) and for every distributor togrow.SEBIhassaidthatitwillpromotealevelplayingfield.However,themarketwillbevolatile.

Ifthedistributortakescareofhiscustomer,thenhewillhavenothingtoworryabout.Today,thereismoregoalbasedselling of Mutual Funds. Nobody is trying to double theircorpusinashortperiodwhichisahealthysign.

It is important todrawconclusions from thepast.TheMutual Fund industry grew 500 p.c. between 2003 and2008butgrowthdroppedtoonly50p.c.between2008and2013.Therefore,weshouldnottakethingsforgranted.Thefuturewillbefabulousifwehandlethingsright.

Shri S. Madhusudanan, Regional Director-EasternRegion, SEBI spoke about the four pillars of MutualFund Regulations, namely, Separation of Ownership &Management; True & Fair Information to Investors; RiskMitigation& Investment restrictions and Fair Valuation to

MCCI Mutual Fund Forum 2018 5

S. Madhusudanan, Regional Director – Eastern Region, SEBI

N. S. Venkatesh, CEO, Association of Mutual Funds in India (AMFI)

maintain Market Integrity. In case of conflicting Investorinterest andAdvisor interest, the latter should be alignedwiththeformer.ThereisahugedemandforMutualFundsinsmallertowns,peopleareconvincedaboutinvestingandadequateinfrastructureshouldbecreated.Investorsshouldstayawayfromshorttermgains.

Today,totalAUMintheMutualFundindustrystandsatRs24laccrore,whichisexpectedtoreachRs.50laccroreinthenext5years.OnedriverofgrowthisindustryfriendlymeasureswhichwerepushedbySEBI.TheAUMofMutualFundindustryis11p.c.ofGDPinIndia.IntheUS,AUMofMutualFundindustryis62p.c.ofGDP.

Major developments and Investor ProtectionMeasuresadoptedbySEBIincludethefollowing:

A)One-timeKYCforinvestinginmutualfunds.

B) Classification of mutual funds into five schemes:EquitySchemes,DebtSchemes,HybridSchemes,SolutionOrientedSchemesandOtherSchemes.

C)ProductlabellingofMutualFundsasunder:

Low-principalatlowrisk;ModeratelyLow-principalatmoderatelylowrisk;Moderate-principalatmoderaterisk;ModeratelyHigh-principalatmoderatelyhighriskandHigh-principalathighrisk.

The above mentioned labels are represented on a‘Riskometer’depictinglevelofriskinanyspecificscheme.

D) Separate Scheme Information Document (SID) /KeyInformationMemorandum(KIM)foreachmutualfundschemeavailableonthewebsiteofmutualfund/itsAMC.

E) Mutual funds to provide following additionaldisclosuresinofferdocument:

- Tenureforwhichfundmanagerhasbeenmanaging

the scheme

- Scheme’sportfolioholdings- Expenseratioincaseofcertainschemes- Scheme’sportfolioturnoverratio

F) Investment in MFs through e-Wallets up to Rs.50,000/-perMFperinvestorperfinancialyear.

G) Cash transactions in MFs up to Rs. 50,000/- perinvestor,perMF,perfinancialyeartoenablesmallinvestorstoinvestinmarket.

H)MFstoissueConsolidatedAccountStatement(CAS)toinvestors,whichwillcontaintotalpurchasevalue/costofinvestmentineachscheme.

I)InstantAccessFacilitytofacilitatecreditofredemptionproceeds in bank account of investor on same day ofredemptionrequest.

J)EachmutualfundtohaveadashboardonitswebsiteprovidingperformanceandotherkeydisclosurespertainingtoeachschememanagedbyAMC.

Shri N. S. Venkatesh,CEO,AssociationofMutualFundsin India(AMFI)said that totalAUMwith the industrywasonlyRs46,000 crore in 1993, so the industry has grownabout50xinthelast25years!

In order to reach theAUMofRs. 50 lakh cr. from thecurrentlevelofRs.24lakhcr.in5years,thereneedstobewideninganddeepeningofthedistributorbase,particularlyreachingout toTier II&Tier III cities.Currently thereareonly 1 lac distributors, which should be increased to 5lac, whowould bring in investors from the smaller citiesforwealthcreation. If therearemoredistributors insmalltownsthentheywillchannelizesavingsfromsmalltown/

MCCI Mutual Fund Forum 2018 6

ruralpeopleandcreatewealthinthesetowns.Thiswouldleadtoabroaderanddeepermarket.

Today, thereareonlyabout10strongAMCsand thesetencontributetoasmuchas80p.c.ofbusiness.WeneedmorestrongAMCswhichwouldleadtogreatercompetitionanddiversification.

Marketswillbevolatile.Weareintegratedwiththeworldeconomy so overseas events will impact the market. Avolatilemarketshowsthatithaslifeandthemarketkeepstryingtoreachnewheights.

AMFIhasahugeroleincreatinginvestorawareness.Adifferentiatedstrategymaybeusedtogetnewinvestorsandtechnologymaybeusedtoincreasethesphereofinfluenceandalsoreducecosts.AVisionDocumenthasbeenreleasedforreachingRs.100laccroremarkby2025.

Wearecelebrating25yearsofprivatesectorpresenceinMutualFundsfrom1993to2018.MutualFundsstartedinIndiain1964withUTIandKothariPioneerwasthefirstprivatesectorMutualFundin1993.

Wehaveonly1lacagents/distributorsinIndiatoday.Investorshavefoundsolutionsduetothephysicalcontactthat distributors are making with investors. DistributorsaretodayconcentratedinafewcitiesandtheTop10citiesprovide60p.c.to70p.c.oftotalAUM.

Today,thereare29croreholdersofPANcardandonly2croreinvestorsinMutualFundswithabout7.5crorefolios.Therefore,thereisscopefortheMutualFundmarkettobebroader and deeper. Customer acquisition is the key andtherearea lot of opportunities evenat thebottomof thepyramid.Thedistributoristhefriendoftheinvestorandtheformerwillcreatewealthforthelatter.

TheMutualFundindustry istodayattractingaboutRs.7,000croreeachmonththroughSIPs.Thisinflowmitigatesvolatility due to withdrawals by Foreign InstitutionalInvestors (FIIs). 90 p.c. of returns come from assetallocationandonly10p.c. fromtiming. InSIP, there isnotiming. The formalisation of the economy is taking placepost demonetisation due to which investors are shiftingfrom physical assets (gold and real estate) to financialassetssuchasMutualFunds.90p.c.ofinflowfromSIPisgoingintotheequitymarket.

ThekeyistheinvestorprotectionprovidedbySEBIwhichhas allowed themarket to grow to Rs. 23 lac crore. Thedisclosuresareofaworldclassstandardandtheinterestoftheinvestorisattheforefront.Ifinvestorrightsareprotected

then the industrywillgrow.AMFIistryingtoeducateinvestorsthrough its ‘Mutual Funds sahi hai’’ campaign. SEBI hasadoptedanuancedapproachtoimplementingregulationsothat the industry isnotdisturbed. Investorprotectionhasallowedthemarkettogrowastherearenomajorscamsinthis regulated market.

Thelongeraninvestorstaysinthemarket,thehigherthereturns.Retail investorstendtoenterthemarketatalatestageinthebullrun.

Several tailwinds have supported the Mutual Fundindustryintherecentpast.Thesetailwindsincludestablemacroeconomics,JanDhan–Aadhaar–Mobileset-upanddemonetisationwhichledtoamassiveshift inliquiditytobanks.BanksdroppedtheirdepositratesinresponsewhichcausedthepublictoshiftfundsfrombankstoMutualFunds.

TheaverageageofanIndianwillbeabout20to25yearsby2020and therewill bea golden run forMutual Fundsfor 30 years. This generation will create wealth for theirretirement. Hence, distributors must ‘catch them young’.AMFI is increasing its activities in Tier 2 cities. It is alsoparticipatinginInvestorAwarenessProgrammeswithSEBI,including in the East and North East India. AMFI would like toadoptpotentialinvestorsbyon-boardingthembygettingaKYCdoneforthemafterwhichthedistributorcanconvertthem.AMFIaspiresfortotalMutualFundAUMofRs.100laccroreby2025.

ThesessionendedwithaheartyvoteofthanksofferedbyShriSmarajitMitra, Chairman, Standing Committee on Banking,Finance&Insurance,MCCI.

Smarajit Mitra, Chairman, Standing Committee on Banking, Finance & Insurance, MCCI

MCCI Mutual Fund Forum 2018 7

Session I - ‘Technology & Digitisation: Possible Impact on Asset Management Industry’.Session Focus:

•Howwilldigital impacttheretailbusinessandoperatingmodelofassetmanagersandwhataretheopportunitiestofurtherdifferentiateinthisnewgrowthenvironment?

•WhatimpactwillFinTechandRobo-advisoryfirmshaveontheindustry?Willitcreatemoreopportunitiesorthreats?

•How can analytics provide key differentiating factors inserving investors with a proactive up-front approach withtargeted investment ideasandhelp the industry inproductinnovation?

•How will digitization facilitate the Mutual Fund IndustrygoingbeyondB-15cities?

•What is the next big step to leverage technology forhasteningtheFinancialInclusiondrive?

TheFirst Sessionwasaddressedbythefollowingspeakers:

Speaker &Moderator: Shri Tanwir Alam, Founder & CEO,Fincart

V. Ramesh, MD & CEO, MF Utilities India Pvt. Ltd.

The speakers at the first session (L to R) Saurabh Arora, Head – Digital Sales & Alliances, Aditya Birla Sun Life Asset Management Co. Ltd., V. Ramesh, MD & CEO, MF Utilities India Pvt. Ltd., Tanwir Alam, Founder & CEO, Fincart, Lakshmi Iyer, CIO – Fixed Income & Head – Products,

Kotak Mahindra Asset Management Co. Ltd. and Madhu Sudhan, Head – Digital Business, Motilal Oswal Asset Management Co. Ltd.

Panellists:

Shri V. Ramesh,MD&CEO,MFUtilitiesIndiaPvt.Ltd.

Smt. Lakshmi Iyer, CIO-Fixed Income & Head-Products,Kotak Mahindra Asset Management Co. Ltd.

Shri Madhu Sudhan,Head–DigitalBusiness,MotilalOswalAsset Management Co. Ltd.

ShriSaurabhArora,Head–DigitalSales&Alliances,AdityaBirlaSunlifeAssetManagementCo.Ltd.

Shri V. Ramesh,MD& CEO,MFUtilities India Pvt. Ltd.saidthatMFUtilitywassetupasanenablertoconveniently

MCCI Mutual Fund Forum 2018 8

executea transaction. Inecommerce, the relationshipwiththecustomeristransactionalinnature.Ontheotherhand,intheMutualFundbusiness,thedistributorhasarelationshipwithacustomerforgood.TherearelessonsfromecommercefortheMutualFundindustrybutthetwoarenotsimilar.

Shri V. Ramesh said thatmany investors after openingtheirMutual Fundaccountwill investdigitally at any time.Thus,conveniencefor investing isbeingbuilt in. Inashortperiodoftime,itisestimatedthat96p.c.ofinvestmentswillbecomepaperless.Furthermore,ifyouupdateyouraccountdetailsinacentralrepository,thechangewillbereflectedinallyourfolios.Also,technologyisenablingpeopleinremoteareastoinvest.

Shri Ramesh said that a ready-made customer whohas done cKYC is available with Paytm. With regard toMutual Funds operating on WhatsApp, Shri Ramesh saidthat execution will be easy. However, some Mutual Fundswillagree todoingbusinessonWhatsAppwhileotherswillnotagreeas theremaybea fear of fraud. In theend, theconvenience ofWhatsAppwillmean that less timewill bespentonoperationsandmoretimecanbededicatedforothermatters.

Shri Saurabh Arora, Head – Digital Sales & Alliances,AdityaBirlaSunLifeAssetManagementCo. Ltd. said that ecommerceand telecomhaveproven thatmorecustomersisbetter.Similarly,theearningofadistributorisgreaterfromalargerAUM.

Adistributorhas toadvisecustomers likeadoctorhastoadvisepatients.Theadviceofafinancialdistributormaybe more important than a doctor’s advice as the adviceof the former impacts future generations. In other words,the distributormust ensure the financial well-being of thecustomer. Ecommerce and technology must ensure thattransactions are taking place in a smooth matter, so that

Saurabh Arora, Head – Digital Sales & Alliances, Aditya Birla Sun Life Asset Management Co. Ltd.

Lakshmi Iyer, CIO – Fixed Income & Head – Products, Kotak Mahindra Asset Management Co. Ltd.

thefinancialadvisorcanspendmoretimeto lookaftertheinterestsoftheclient.

ShriSaurabhArorasaidthatdigitaldistributionishelpingaddfreshcustomers.Infact,alargenumberoffolioswereadded by the industry last year and 50 p.c. of thesewereaddedthroughdigitaldistribution.Inotherwords,customersare being addedwithout spending a lot of time inmeetingcustomers.

InresponsetoaqueryonwhetherPaytmisasourceofdisruption,ShriSaurabhArorasaidthatPaytmisseenasabigopportunity foracquiringcustomers in theMutualFundbusiness.Hence,theentryofPaytmispositive.AccordingtoShriArora,itisbecomingeasiertodoKYCinIndiawithonlyAadhaarandOTP.

Smt. Lakshmi Iyer, CIO-Fixed Income&Head-Products,Kotak Mahindra Asset Management Co. Ltd. said that China has120crorepeopleand80croreInternetusers.Indiawithapopulationof120crorehas50crore Internetusers.TheUShas30crorepeople,80p.c.ofwhomuse the Internet.Thepointisthatdifferentcountriesareatdifferentstagesofdigitisation.

Smt. Lakshmi Iyer said that robotadvisoryhasbeen inplace for many years. But, they have not mademoney. Asmileisofvaluetoacustomerandarobotcannotsmile.TheUShas200robotadvisors.Thetechnologyofarobotadvisorneedstobemanagedandrobotsshouldbeusedasatool.

Smt.Lakshmi Iyersaid that80p.c.of trades in theUSare done throughalgorithms. Itwill take some timebeforealgorithmbasedmodelscomeintothemarketinIndia.Inthisregard,artificialintelligencecanbeapowerfulenabler.

Shri Madhu Sudhan, Head – Digital Business, MotilalOswal Asset Management Co. Ltd. said that digital givesthreethings,namelyscale,reachacrossthecountryandit

MCCI Mutual Fund Forum 2018 9

Madhu Sudhan, Head – Digital Business, Motilal Oswal Asset Management Co. Ltd.

Tanwir Alam, Founder & CEO, Fincart

The speakers at the second session (L to R) Purushottam Saraf, Additional GM & Regional Head (East), BSE Ltd., Vipin Bhandari, Zonal Head – Retail Sales & Distribution (East), ICICI Prudential Mutual Fund, Romit Barat, VP & Head – PMS & AIF, Narnolia Financial Advisors Limited, Arjun Chaudhuri, Regional Head – Retail Sales (East), DHFL Pramerica Mutual Fund, Aloke Sasmal, Director, Money Matters and Rajesh Koradia, VP,

Independent Consultants & Advisors Association (ICAA)

optimisesthecostsofanorganisationoveraperiodoftime.AlargenumberoftransactionsaretakingplaceonUPI.Weareattherightstageofthedigitalcurve.Wehavenooptionbuttoadoptdigitaltechnology.

Shri Madhu Sudhan said that a robot can acquire acustomerwithanexpenseofaboutRs.4,000.AMutualFundcanearnrevenueofRs.10,000toRs.11,000fromacustomer(undercertainassumptions).TheDigitalmediumprovidesanopportunitytoacquirecustomersthroughFacebookandotherwebsites.Thebasicsofclientacquisitioncanbeeasilylearnt.

ShriTanwirAlam,Founder&CEO,FincartsummeduptheSessionbysayingthattechnologywillhelpgrowtheMutualFundbusiness.Whenyouacquireacustomer, youwant toknow where the customer will spend time. So, you go toFacebookandWhatsApp.

Shri Alam said that it is possible to acquire customersthrough the digital medium. He advised all to performmonotonous work with technology and use technology togrowtheirbusinessbyleapsandbounds.

MCCI Mutual Fund Forum 2018 10

Session II - East & North East: Possible Role in boosting India’s MF Industry’.Session Focus:

•East&NorthEastof Indiaarestill laggingother regionsdespite having tremendousmarket potential.What are thekeychallenges&opportunities?Whatisthewayforward?

The Second Session was addressed by the followingspeakers:

Moderator: ShriRomitBarat,VP&Head-PMS&AIF,NarnoliaFinancialAdvisorsLimited

Panellists:

Shri Purushottam Saraf, Additional GM & Regional Head(East),BSELtd.

ShriVipinBhandari,ZonalHead-RetailSales&Distribution(East),ICICIPrudentialMutualFund

Shri Arjun Chaudhuri, Regional Head-Retail Sales (East),DHFLPramericaMutualFund

Shri Aloke Sasmal, Director,MoneyMatters

ShriRajeshKoradia,VP,IndependentConsultants&AdvisorsAssociation(ICAA)

Purushottam Saraf, Additional GM & Regional Head (East), BSE Ltd.

ShriPurushottamSaraf,AdditionalGM&RegionalHead(East),BSELtd.saidthateverythingisdoneelectronicallyonBSEStARMF-BSE’sMutualFundsPlatform,whichisaMutualFundsaggregator.BSEStARhasdoneabout1.2croreordersworthoverRs.58,000crore.Itisapaperlessplatformandvideosareavailableforalltheprocesses.FAQsarealsoavailable.12,500IFAsareregisteredwithBSEStARMFofwhom2,500areinEasternIndia.

ShriPurushottamSarafaddedthattodaythereare1lacIFAsand2,500IFAsarebeingaddedeachmonth.

Shri Saraf stated that many people in the East andNorth Eastern India do not understand Mutual Funds and theassociatedtechnology.Consequently,theyareafraidofMutual Funds.

Shri Vipin Bhandari, Zonal Head-Retail Sales &Distribution(East), ICICIPrudentialMutualFund said that everyone in the industry is promoting that ‘mutual fundssahi hai’. Consequently, investors are understanding thatMutualFundsaregoodforthem.

Ina laterstage, investorswilldecideonwhichMutualFunds are good for them. Mutual Fund distributors areapproaching clients for investments in equity. They areinforming clients about Mutual Funds in general and notaboutanycompanyinparticular.

Inafuturecampaign,ICICIPrudentialMutualFundwillinformclientsthatdebtinstrumentsaregoodforinvestorsandtheyshouldinvestinDebt/LiquidFunds.Inotherwords,thecompanywillcommunicate to investors that investinginMutual Funds is not just about equity investments butincludesinvestmentsinDebtandLiquidfunds.

ShriVipinBhandariadviseddistributorstoselldisciplinewith investments and goals to investors and not sell thereturnsthatinvestorswillmake.

ShriArjunChaudhuri,RegionalHead-RetailSales(East),DHFLPramericaMutualFundssaidthatifyouhavefaithintheIndianeconomy,thenyoushouldinvestinstocks.

The‘MutualFundssahihai’campaignishelpingeveryMutual Fund. This campaign is an all encompassingeducationalinitiativetoeducateinvestorsanditisthefirststageofcustomeracquisition.

OutofthetotalAUMofRs23laccrorewiththeIndianMFindustryon21July2018,aboutRs10laccroreisfromretailinvestors. This huge amount invested by retail investorsindicatesthattheyhaveacceptedMutualFunds.Moreand

Vipin Bhandari, Zonal Head – Retail Sales & Distribution (East), ICICI Prudential Mutual Fund

MCCI Mutual Fund Forum 2018 11

Rajesh Koradia, VP, Independent Consultants & Advisors Association (ICAA)

Arjun Chaudhuri, Regional Head – Retail Sales (East), DHFL Pramerica Mutual Fund

Aloke Sasmal, Director, Money Matters

moreretail investorsareenteringthemarketeachmonth.In fact, aboutRs. 7,000 crore (or aboutUSD1 billion) isbeinginvestedthroughSystematicInvestmentPlans(SIP),mostlyinequitymutualfundseachmonth.DuetothelargeinflowthroughSIP,thetraditionaldependenceofthestockmarketoninflowsfromForeignInstitutionalInvestors(FIIs)hassharplyreduced.

ShriArjunChaudhurisaid thatLiquidFundsaregivinga return of about 7 p.c. per annum and they are eligibleforindexationbenefitforLongTermCapitalGainstaxationpurposesafterthreeyears.Asaresult,LiquidFundsfacealowincidenceoftax.

Shri Rajesh Koradia, VP, Independent Consultants &Advisors Association (ICAA) said that advisors must setexpectations by focussing on the goals of investors. Theadvisor must educate the investor that it is a gradualjourney.

If the expected return is not realised, then investorswillbedisappointed.Therefore,itisimportanttomoderateunrealisticexpectationsofinvestorsfromtheequitymarket.ItisbettertotellinvestorsthattheywillmakealittlemorefromequitythandebtorFixedDepositandthattheirequity

investmentmay be volatile. In the end, investors will behappyastheyunderstandthemessage.

Shri Aloke Sasmal, Director,MoneyMatters said that anemergingcountryshouldhaveaP/Eratioofabout16x.TheIndianstockmarketboomedbetween2003and2007.Subsequently, by 2010, the market settled at the rightvaluation.We can expect a return from the stockmarketofthegrowthrateofGDPplustheinflationrate.So,ifweassumetheinflationratetobe6p.c.andgrowthrateofGDPtobe9p.c.,thenwecanexpectareturnofabout15p.c.fromthestockmarket.

Romit Barat, VP & Head – PMS & AIF, Narnolia Financial Advisors Limited

Shri Romit Barat, VP & Head-PMS & AIF, NarnoliaFinancialAdvisorsLimitedsummeduptheSession.HesaidthatthreeparametersneedtobetakencareofinagrowingindustrysuchastheMutualFundbusiness,namelyproduct,accessandliteracy.

ShriBaratadded thatclientswant toknowhowmuchreturn they will earn from their investments. Ignoranceamonginvestorsisabusinessopportunity.ShriBarataskedfinancialadvisorstocreateabusinessplanandasktheirclientstobepatient.

MCCI Mutual Fund Forum 2018 12

KeyTakeAways•Despiterapidgrowth, India lagsmostmajornations

intermsofAUMofMutualFunds,asapercentageofGrossDomestic Product (GDP). In India, with 42 Mutual FundhousesmanagingassetstothetuneofoverRs.23laccrore,assetbaseofMutualFundsasapercentofGDPisjust11p.c.whiletheworldaverageis62p.c.• Mutual Funds have not yet been able to gain a

significant share of investors’ wallet mainly due to lackof financial awareness among a major segment of thepopulation.Moreover,thereisalackofhealthyparticipationfrominvestorsbeyondtheTop15 locations.Asperrecentstatistics,more than80 p.c. of theMutual Fund industryAUMcomesfromthetop15cities.•Goingforward,thereisnodoubtthattechnologywill

play themost important role in increasing the size of theMutualFundindustry.•TheGovernmenthasbroughtinenablers,suchasKYC,

whichhaveallowedwealthcreation. It isahighpotentialforgrowthindustryanditcanacquireanAUMofRs.50laccrorein5yearsandRs.100laccroreinthenext10years.• In order to grow rapidly, the Mutual Fund industry

needstodothefollowing: oAdoptinvestoreducationbasedonconsumerinsights oExpandandmodernisedistribution oWoothecustomer oSimplifyproductsandneverengineer.Currently,

MutualFundproductsareoverlyengineered•TheMutualFundindustryneedstoexpanddistribution

by setting high standards and endowing the professionwith prestige. Distribution can be modernised with asegmentation and niche approach and by shifting fromnewclientacquisitiontohigherengagement.Thisisnottheage formassmarketing. Today, everybodyhasa differentrequirement.• Growth will not come from only chasing existing

customers.Youhavetoreachouttonewinvestorsforwhichweneedmorefinancialadvisors.Currently thereareonly1lacdistributors,whichshouldbeincreasedto5lac,whowouldbringininvestorsfromthesmallercitiesforwealthcreation.•Today,thereareonly10strongAMCs.Weneedabout

40strongAMCsforavibrantandcompetitiveMutualFundindustry.• In theMutual Fund business, the distributor has a

relationshipwithacustomerforgood.•Today,thereareabout2croreMutualFundinvestors.

There is a huge potential of channelizing the PAN cardholders, 29 crore in number, to createmore Mutual Fund

investors.• SEBI has taken a proactive regulatory stance to

ensure that the industry grows in a sustainable manner.Theregulationshavebeennuancedinthewaythatitbringsmore transparency and disclosure from the Mutual Fundhousesandbenefitstheinvestors.• The key is the investor protection provided by SEBI

whichhasallowedthemarkettogrowtoRs.23laccrore.The disclosures are of a world class standard and theinterestoftheinvestorisattheforefront.Ifinvestorrightsare protected then the industry will grow. AMFI is tryingto educate investors through its ‘Mutual Funds sahi hai’campaign.•TheMutualFundindustryistodayattractingaboutRs.

7,000croreeachmonththroughSIPs.Thisinflowmitigatesvolatility due to withdrawals by Foreign InstitutionalInvestors (FIIs). The formalisation of the economy istaking place post demonetisation due to which investorsareshifting fromphysicalassets(goldandrealestate) tofinancial assets such as Mutual Funds. Due to the largeinflowthroughSIP,thetraditionaldependenceofthestockmarketoninflowsfromForeignInstitutionalInvestors(FIIs)hassharplyreduced.• The advice of a financial distributor may be more

importantthanadoctor’sadviceastheadviceoftheformerimpactsfuturegenerations. Inotherwords,thedistributormustensurethefinancialwell-beingofthecustomer.• Robot advisory has been in place for many years.

But, they havenotmademoney. A smile is of value to acustomerandarobotcannotsmile.TheUShasabout200robotadvisors.Thetechnologyofarobotadvisorneedstobemanagedandrobotsshouldbeusedasatool.•Digitalgivesthreethings,namelyscale,reachacross

the country and it optimises the costs of an organisationoveraperiodoftime.•If theexpectedreturn isnot realised, then investors

willbedisappointed.Therefore,itisimportanttomoderateunrealisticexpectationsofinvestorsfromtheequitymarket.In other words, Distributors should sell discipline withinvestmentsandgoalstoinvestorsandnotsellthereturnsthatinvestorswillmake.• Several tailwinds have supported the Mutual Fund

industryintherecentpast.Thesetailwindsincludestablemacroeconomics,JanDhan–Aadhaar–Mobileset-upanddemonetisationwhichledtoamassiveshift inliquiditytobanks.BanksdroppedtheirdepositratesinresponsewhichcausedthepublictoshiftfundsfrombankstoMutualFunds.•Threeparametersneedtobeconsideredinagrowing

industrysuchastheMutualFundbusiness,namelyproduct,accessandliteracy.

Reportwritten&compiledbyShriRajivMukerji,DeputySecretary,MCCI

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