The Sebi Chairman Ajay Tyagi’s statement at AMFI Mutual Fund Summit 2018 on promoting direct plans of mutual funds among investors who can invest on their own has unnerved many mutual fund advisors. Edited Excerpts.
Sebi chief spoke about promoting direct plans of mutual funds among individual investors who can invest on their own. Do you think new investors can invest directly in mutual funds?
Essentially, mutual fund distributor is the first point of contact for any potential investor coming in. After maybe a couple of years, when that investor remain invested, then he/she understands the mutual fund markets much better. That is when with the choice available to him/her can move to the direct investments and save on the cost. Otherwise, new investors don’t come into the direct fold much. Many investors don’t even know that they can invest directly, and how to do it. That is where AMFI is trying to tap, to know that there is an option for them to do it on their own. And this will take some time for the investors to get well-versed with the field, until then, the mutual fund distributors will remain the first point of contact.
Many investors complain about mis-selling by advisors. They point to freebies and travel trips offered to advisors/distributors by the AMCs. How does AMFI plan to weed out mis-selling because of these incentives?
It is usually the AMCs that are in direct touch with the distributors. AMFI doesn’t have a role in that. At best what we could do was that we put out a code of conduct on this front for the AMCs. The code of conduct says that AMCs and distributors should not get into such situations which lead you to mis-sell mutual fund products. So, if there is any violation that is being noticed by us, then at AMFI level, we have a committee called the ARN committee which takes actions against such things.
Many mutual fund distributors present at the summit were not happy about the emphasis on direct investments in mutual funds. What are your thoughts?
See, this is normal in every market. As a distributor if you were having a free hand and suddenly a competition comes to the market. People may not like it. It is essentially a knee-jerk reaction. Ultimately, you would know that the pie is so large that there is enough space for the distributors to make their living even with the direct investments. So, I believe that there will be no cannibalizing of the mutual fund distributor business by direct investors.
The data clearly shows that the AUM has grown massively over the last two years. The ‘Mutual Fund Sahi Hai’ campaign has a role to play in it. Is AMFI planning to elaborate the campaign to bring awareness? How do you plan to make the advertisements more clear on the front that some investors do need advisors?
We are trying to make it as clear as possible that not all investors can do it on their own. One of the ads that we played today clearly shows two people talking where one person says to the other that since you don’t know much, you should invest via a distributor. So there is a subtle amount of communication that is happening.
Apart from the ‘Mutual Fund Sahi Hai’ campaign which has been a hit already, what are the other plans that AMFI has for investor awareness?
We are running a lot of on the ground activities with Sebi in around 36-40 cities. We have the ‘Jan Nivesh’ programme that we are doing to make people aware about the investment opportunities in mutual funds. We are planning to tap the tier-3 and tier-4 cities in the future.