At present the mutual fund industry in India has more than 40 players and a total asset base of more than 13 lakh crore. However, the reach of mutual funds to the vast majority is abysmally low, limited mainly to Metro and tier I cities. Numerous studies have shown the primary reason why mutual funds are less popular with Indians is the lack of awareness. Going by the asset base, mutual fund houses should have spent approximately Rs 2,600 crore on investor education. Against this, they have spent just 330 crore between October 2012 and April 2015, as reported by the Economic Times dated January 19, 2016.

Earlier, the SEBI had decided to walk the extra mile to reach out to Indian investors. It had taken a number of initiatives and encouraged the launch of investor education programmes. It had given a responsibility to mutual fund houses as well, directing that the fund houses should spend a minimum of 0.02% of their Assets under Management (AUM) on investor awareness programmes each year. But lately, it has found that the mutual fund houses haven’t held up their end of the bargain, diverting funds meant for investor education programmes towards other purposes. This didn’t go down well with the capital market regulator.

PersonalFN hoped the capital market regulator would have censured the mutual fund houses for their blatant misgivings and for launching New Fund Offers (NFOs) when the valuations are high. The launching of NFOs, regularly, is a sign that shortcuts to success were taken to grow AUM. The fact is, there are no shortcuts to informing and educating investors. Which is why PersonalFN believes what the Securities and Exchange Board of India (SEBI) is doing now should have been done much earlier.

More to the story…

Taking a strict action, SEBI has now asked mutual fund houses to hand over half the unspent money meant for investor awareness programmes to Association of Mutual Funds of India (AMFI). The nodal association of mutual funds is expected to spend these funds each month towards this cause beginning April 2016.

PersonalFN believes this is a brave move as it will keep brazen behaviour of mutual funds under check. That being said, PersonalFN also believes having good intent is not enough and spending a certain amount isn’t enough to ensure investors are informed in the right manner. Nonetheless, SEBI is taking right steps in the right direction.

This requires far a greater commitment, like PersonalFN has shown from time to time. It has done plenty to educate investors (Money Simplified guides, https://www.moneysimplified.in/)

…and now through a new initiative it is set to groom financial advisors to act as financial guardians. Advising lay people and investors alike on investments is a matter of trust, and trust can’t be bought by squandering money. It has to be earned.

The ground reality is that despite such programmes being launched, less than 5% of Indians invest in mutual funds. Let’s hope the funds are utilized in an optimal manner to bring about a change to the general perception about mutual funds. There are many lessons to be learned here…by all.
 

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nikkuraje@gmail.com Jan 20, 2016 SEBI and Other Regulators are Nothing But Agents asking the Cheaters - Not to cheat Alone, Let us cheat altogether in a Legal way.... after giving Legal Warning to Investors or Consume Degrs that we warned you that You are involving yourself in a Risky Thing... Still You involved yourself in the Risk... What SEBI or Other Regulators have done to get Money back from Cheaters or Defulters.... Big Examples are Sahara and Kingfishers Defaulters

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