With a flat fee structure, large customers question distributors on the charge: Ashu Suyash of Fidelity
Having put in two decades in banking and financial services
business, Ms Ashu Suyash, Country Head-India, Fidelity Worldwide Investment,
strongly believes that the best way to increase retail participation in India
is through mutual funds handling pension money. In a one-to-one interaction
with Business Line she speaks on issues concerning the mutual fund industry,
from distributor due diligence to investor awareness.
In these volatile market conditions, do you find investors
being a little wary of foreign fund houses?
Today track record counts; it's not about being local or foreign.
At the end of the day, I would say today's investors are by and large the
tech-savvy category as awareness among investors remain poor. A good thing is
that our share has gone up this year. There is no doubt that an SBI mutual fund
will have the rub-off of State Bank of India, the parent.
Has the AMFI investor awareness programme been successful?
We are seeing better awareness. My observation is the
domination is still by the large cities. But, if you look at flows – the new
money that is coming in – you are beginning to see an increase there. We are in
an environment where market volatility is very high. So the same customers who
put in Rs 20,000 may invest only Rs 10,000. It is a very long haul but
awareness is improving.
You have been repeatedly talking about the awareness. What
stops the industry from stating that it deploys 100 per cent of the investor
money?
Let us first understand that we cannot communicate directly
on issues such as yield on debt or equity performance. Hence, the ability to
present our case to the customer is pathetic.
Has the industry represented its case on this to SEBI?
SEBI has a view on it. But, look at the kind of disclaimers
we have to give. When I advertise “All my funds outperform my benchmark,” it is
has to be in a table that customers do not understand. I am not permitted to
state all my funds outperform the benchmark. Whereas all insurers are free to
state their case with a standard disclaimer that “Insurance is the subject
matter of solicitation.”
One of the reasons I have been advancing for mutual funds
managing pension funds is because it is the best way to educate customers as
they will automatically track their investments. This is exactly the way in
most markets. Hong Kong's mandatory Provident Fund is like that.
So you have approached SEBI on this?
We have been saying this for about seven years. It is not
just that mutual fund industry players want it. There is huge benefit for the
end customer, even from a government perspective. That is indeed the most
sensible way to increase participation of the retail investors in the capital
markets.
How will the distributors' decision to opt-in or opt-out of
charging transaction charges affect the business?
After the entry-load was removed, most distributors are not
charging their customers. Collecting Rs 50-100 is very, very cumbersome. In
some ways, transaction charge earlier did make it easy. Now, with a flat fee in
place, large customers question distributors on the charge and why it should
not be waived.
Moreover, there is no material benefit for those who call on
customers. It only works for those signing on customers through mass mailing.
The brand recall for your tax advantage fund is high. Is the
category itself popular?
We are one of the few players who advertise throughout the
year. The reason we have got good franchise on the tax fund is that it has a
great track record and is widely distributed.
Today our flagship Fidelity Equity Fund is about Rs 3,250
crore and the tax fund around Rs 1,150 crore. On a stand-alone basis, the
performance of the tax fund is very good.
Has cost of retaining talent gone up?
No, I would not say that. I would have said that in 2007.
Again, I will not say supply exceeds demand. It is important to retain talent,
because cost of hiring, training and making them deliver is very high.
Will the RBI guideline asking banks to reduce exposure in
mutual funds affect you much, since 70 per cent of your AUM is equity?
No. We have always looked at fixed income for raising
stickier money than the 2-day, 7-day kind of money. We target longer-term
assets and launched the short-term income fund in December last year, which has
grown from Rs 200 crore at launch to over Rs 800 crore now. Importantly, most
of it has been from individual customers.
As a global player, do you find discrepancies in Indian
regulations?
It does happen once in a while. But over the last decade,
the Indian capital markets have really stepped up infrastructure and policies
are truly world class.
For instance, proxy voting came here only now. But we have
always had it in other markets as a core part of our fiduciary responsibility.
But that does not mean you cannot do it here and SEBI does not bar you from
following it.
So, we do tend to follow best practices from across the
world and that sometimes frustrate people dealing with us.
A recent good example is distributor due-diligence which has
just been introduced by SEBI, whereas we always did it. Our distributor
empanelment process was long drawn and questioned for the time spent on it.
Now, I think it is understood that you have to go through it.
Source: http://www.thehindubusinessline.com/markets/article2729414.ece?ref=wl_companies
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