Savers are not interested in investing in mutual funds. But instead of trying to find out the real reasons, the fund companies seem to think that if they use marketing gimmicks like consumer products companies, they will be able to expand their reach, rather than simpler products and actual performance
The mutual fund industry, which is facing continuous erosion in equity assets for several years now, is clearly worried about its survival. Some desperate measures were discussed at an industry summit in June to meet the objective of ‘reaching out to a larger number of investors’ and focus on ‘investor education & awareness’. The industry believes that its problem lies in the fact that 74% of its market is concentrated in just five cities, so it engaged PriceWaterHouse (PWC) to come up with solutions.
Typical of consulting firms, PWC held out the promise of ‘big opportunity for growth and further penetration’ and offered some neat, if fanciful, solutions that are attractive to companies with spending power but no ideas. PWC’s suggestions were: to market mutual funds as a ‘concept’; use ‘social media’ to spread the word; and use ‘mobile banking’ which could be a potential game-changer in marketing mutual funds. Let’s examine each of these.
Fair & Lovely Mutual Funds: Since a speaker from Hindustan Unilever was invited to tell the industry how to sell mutual funds like personal-care products, let us look at the hottest-selling ‘concept’ created by such companies. Giant multinationals spend crores of rupees every year to tell Indians that being of fairer skin should be our ultimate goal and desire. If you are fair, you are immediately more beautiful, more confident, have more friends, get the best jobs and attract better partners, is their message. In recent years, they have expanded this ‘concept’ to men and doubled their market. Prominent media houses ‘help’ to promote the ‘concept’ of metrosexual males who are unembarrassed about using an array of cosmetics. Such editorial promotions are now part of advertising deals.
More importantly, these companies have no qualms about making claims that are outright false or misleading. They routinely launch products with blatantly false and bogus claims about making your skin X-times fairer, your hair Y-times stronger or use tags like ‘guaranteed’, ‘best’, ‘100%’ and ‘herbal’. They also file complaints against each other’s products which are regularly upheld by the Advertising Standards Council of India (ASCI). The offending ad is withdrawn for a few months until another outrageous ad takes its place. Since ASCI is not a statutory regulator, it remains soft in dealing with ‘habitual offenders’. After all, media and advertisers are beneficiaries of big advertising budgets. What about consumers? Why don’t they protest? Well, because these nicely perfumed gels and lotions may not make you fairer, but they are harmless; they moisturise and they allow people to live in hope. In other words, the consumer is a willing sucker in this case and there is little harm done.
Can mutual funds (MFs) try to sell their schemes like fair & lovely? MFs have an obligation to perform. If an MF scheme, over a period of time, gives you low or negative returns, it hurts your financial future. It is not harmless.
Sell MFs through Mobile Phones? Before you say: ‘What an idea sirji’, pause and think. True, India has a mobile subscriber base of 900 million, but using phones to invest, exit and redeem funds? What do you do about a regulator whose complex KYC (know your customer) procedures make it a hassle even to buy online? Moneylife has been researching the online subscription process offered by leading distribution companies and has come to the conclusion that it is so cumbersome that only net-savvy and dogged individuals would use this option, especially for first-time subscription. If the entry to mutual fund investment is difficult, how can mobile phone transactions make it easier? And who will MFs target for mobile transactions? If it is the affluent class in smaller cities and towns, then access to information is hardly a barrier. Surely PWC does not expect the non-urban poor, who have low income and savings, to use mobile banking to buy mutual funds?
Social Media for Mutual Funds: PWC suggests that mutual funds should use social media for product innovation, customer services and real-time information with the aim to create unique solutions and experiences. Creating twitter handles or facebook pages only works when handled well and for companies that deliver on their promises. It can be brutal and enormously damaging when a company has poor service, grievance redress mechanism or couldn’t care less for customers, which is often the case.
Consider just one example. HDFC Mutual Fund is consistently among the best performers in the industry and HDFC Bank is certainly the best in terms of its stock price and profitability. But check the Bank’s @HDFC_Cares twitter handle and you find that it is a magnet for angry customers to vent their ire. In fact, it would probably do well to avoid a possible negative rub-off. Social media is completely democratic and there are plenty of global case studies to show that the impact of hundreds of instant opinions (including false and uninformed ones) can devastate a brand.
The best advice that PWC can give MFs is to focus on performance and pay attention to consumer needs instead of launching products only to enhance assets under management. The investment will come.
Earlier in May, Ranbaxy the unit of Japanese Daiichi Sankyo, paid $500 million to settle similar charges relate with manufacture and distribution of certain adulterated drugs made at Paonta Sahib and Dewas in India
Ranbaxy Laboratories has agreed to pay about $420,000 to settle civil and criminal complaints of selling drugs of inferior strength, purity or quality Idaho state in north-western US.
Earlier in May, the US subsidiary of Ranbaxy agreed to pay $500 million—the largest settlement with a generic medicine maker till date, while pleading guilty to “felony charges” relating to manufacture and distribution of certain adulterated drugs made at two Indian units.
The alleged 26 sub-standard generic drugs were made at Ranbaxy's factories in Paonta Sahib and Dewas in India.
Idaho had joined several states and the US government in alleging that Ranbaxy products manufactured between April 2003 and September 2010 did not meet US Food and Drug Administration (US FDA) standards and caused Medicaid to pay fraudulent claims. Medicaid is a US health programme for families and individuals with low income and resources.
Idaho's share of the settlement is $419,914. About half of that will go to Idaho Medicaid as restitution, and about half will go to Idaho's general fund.
Ranbaxy also pleaded guilty to seven felony counts of violating the US Food, Drug and Cosmetic Act and agreed to pay $150 million in criminal fines and forfeitures.
Even last month, the European Commission (EU) imposed a fine of 10.32 euros on Ranbaxy.
In afternoon trades on Tuesday, Ranbaxy shares were trading marginally higher at Rs343.5 on the BSE, while the benchmark Sensex was also up 0.6% at 19.433.
Mumbai's Diamond Jubilee High School declined the aid from state government and converted itself into private unaided school affiliated with ICSE
The Bombay High Court has held that the government would have no say in controlling fee structure of private unaided schools. The Court said, such schools do not get grant-in-aid but spend huge amount of money from their own funds to create facilities and extra-curricular activities for students.
Hearing a petition filed by Diamond Jubilee High School in Mazgaon justices SJ Vajifdar and MS Sonak held that there was nothing to indicate that the petitioners (school authorities) had acted malafide.
Accordingly, the court set aside an order passed by the Education Department of Maharashtra directing a private unaided school in Mumbai to refund fees to a group of students from academic year 2006-07 to 2011-12 as the school did not get affiliation to ICSE.
Diamond Jubilee High School, a minority educational institution, was affiliated to the Maharashtra State Board of Secondary and Higher Secondary Education (SSCE Board) up to academic year 2006-07. The school was receiving aid from the Government till this period. However, thereafter it decided to decline aid and convert itself into a private unaided school.
The school resolved to convert affiliation from SSCE Board to ICSE, in respect of secondary section of the school, that is, from standard ‘V’ onwards. In this regard, the necessary permissions were applied for and obtained. The conversion was to take place progressively, which means that each year one higher class would stop receiving aid.
The judges further said that the facts set out in the petition have not been disputed by the respondents. In fact, no counter has been filed by any of the respondents.
The judges opined that the right to establish an educational institution is a right guaranteed by Article 19(1)(g) of the Constitution and as such any restriction upon such right can be placed only by law enacted by legislature and not by a Circular or a Resolution issued under Article 162 of the Constitution of India.