AMFI’s Investor Awareness’ Committee, created at the behest of SEBI, may end up blowing up a lot of money for no reason
Even as investors are turning their backs on mutual funds (MFs), regulators and the industry have suddenly woken up to ‘protect’ and ‘educate’ them. The preferred solution? Spending crores of rupees in advertisements. Sometime ago, the Association of Mutual Funds in India (AMFI) formed two committees named ‘Investor Awareness’ and ‘Investor Connect’, under a directive from the Securities and Exchange Board of India (SEBI). These committees are now in action.
The Investor Connect Committee has commissioned a survey on what investors think and how they behave, while the Investor Awareness Committee is planning to, well, spread awareness about mutual funds. According to a chief executive (CEO) of an asset management company (AMC), AMFI has around Rs9 crore in its kitty, of which Rs3 crore to Rs4 crore will be spent by these two committees. However, one of the committee members denied that such a campaign was being planned.
Apart from insisting that these committees be set up, SEBI also suggested the names of the committee members. According to sources, the Investor Awareness Committee is planning to make a proposal to spend Rs40 crore on investor-awareness advertising. Apparently, the Committee is hoping to seek SEBI’s support to tap the Investor Education and Protection Fund (IEPF) for a sum of Rs40 crore; receiving approval from IEPF requires clout.
It is not clear whose brainchild such a massive ad campaign is. AMFI believes that an advertising blitzkrieg will increase investor awareness, but there is no study to substantiate a correlation between ad campaigns and investor awareness. Ad campaigns will only fill the pockets of large media houses. Maybe that would ensure a pro-industry and pro-regulator stance from the media.
The members of the Investor Awareness Committee include Sundeep Sikka, CEO of Reliance Mutual Fund; Kailash Kulkarni of Kotak MF; Srinivasan Jain, marketing head of SBI MF; and Sanjay Kaley of Fidelity Mutual Fund. This Committee has prepared a white paper on the state of the mutual fund industry and what needs to be done to make it grow. India’s investor population has plummeted from 20 million in the 1990s to eight million now (according to the Swarup Committee report of 2009), despite a booming economy and a bull market.
One of the reasons for the slow growth of the industry and the dwindling investor base, according to Investor Awareness Committee, is that investors are unaware of the benefits of equity and mutual fund products. So, it has decided that the way to make them aware is by unleashing advertisements.
Following SEBI’s ban on entry load in August 2009, MF distributors found it unprofitable to sell MFs. Subsequently, SEBI directed AMCs to implement trail commission, whereby commission is paid to the new distributor if a customer decides to change his broker/distributor. This has only led to a game of poaching assets under management (AUM) among the AMCs and fund distributors.
Industry sources indicate that the Investor Connect Committee has commissioned the Indian Market Research Bureau (IMRB) to do a study on investor behaviour. The Committee and the research agency are trying to study something which is already known.
It remains to be seen whether such workshops and seminars on investor awareness bring about tangible benefits or whether investors need it at all.
Our email queries sent to Sundeep Sikka, AP Kurien of AMFI and Srinivasan Jain remained unanswered.
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