With e-commerce companies mushrooming nineteen to the dozen in recent times, striving for a piece of the market share, trying to win their customers’ confidence, they eventually aim to change the consumer’s buying habits. To be able to do that, e-commerce companies are leaving no stone unturned.

Though genuine products, good after-sales services, and overall customer satisfaction still remain the essence of any trade, a number of things have changed. For example, the myriad ways companies reach out to their potential customers, the advertising mediums employed, and most importantly, the product pitch. E-tailers offer you the same stuff for a price less than that offered by brick- and-mortar stores. Most of the times, there is a special discount for first time buyers. With services right from food joints to jewellery designers, they come up with ways to connect to their customers online and increase their online sales, as it helps reduce overheads. Do you know who’s falling behind the curve? Mutual funds.

If you refuse to change, the changing times will make you outdated. Mutual funds are still heavily dependent on a decade-old formula for increasing sales numbers. The aggressive push for NFOs and thrust on commission-driven sales has cost mutual funds a pretty penny. Realising the adverse effects of this on the growth of industry, Securities and Exchange Board of India (SEBI) has turned out suggestive measures for improving the health of the industry.

As a part of this effort, the market regulator asked mutual funds to:
 

• Improve transparency in disclosures and operations


• Increase their accountability


• Launch simple products


• Try out e-commerce platform for increasing sales


• Ensure the distributor or any other person selling mutual funds has the adequate educational qualifications

The recently organised ASSOCHAM event where the SEBI put forward these recommendations was not the first occasion when the market regulator advised mutual fund houses to improve their ways of doing business. PersonalFN is of the view that no matter how rapidly mutual funds change their disclosure norms or start offering products through e-platforms, unless they become more accountable, it is unlikely that their reach and popularity will grow.

Mutual funds are in the habit of collecting funds during good market phases. In the past, aggressive selling tactics and extremely persuasive narratives had increased the expectations of investors. As the products were often sold without making investors aware about risks involved; many first time investors ended up having unpleasant experiences with mutual funds. They are shying away now and most people still don’t know much about mutual funds and those first timers who tried their luck, now feel mutual funds are not suitable to them.


Importance of investor education

PersonalFN is of the view that there is no substitute to investor education. Mutual funds may or may not try the e-commerce route. They may or may not promote their products aggressively, but unless the customers’ interest starts concerning them more than their own; it’s difficult to see a change in the current situation. Sadly, many fund houses haven’t learnt from their mistakes and continue to launch NFOs even now.

Schemes with higher outflows and weak performance don’t get as much as attention as the performing ones .Don’t we see only a few schemes of any fund house always stay in focus and are marketed regularly? Yet, you will hardly find a fund house performing well across all departments. It’s not always the market that contributes to success or the failure of a scheme; more often it’s the approach of mutual fund house.

Mutual funds will first have to work to reduce such partial treatment and have to think about investors stuck in ‘unpopular schemes’. SEBI recently asked mutual funds to first merge schemes before launching new ones; but scheme mergers are not going to solve all problems. It remains to be seen how much longer it will take for mutual funds houses to admit their mistakes and take a fresh stand.

How to select a right scheme?

PersonalFN helps investors find consistently performing schemes that come from mutual funds with good track record. So cease worrying and don’t lose heart after reading about the sorry state of affairs. Not all fingers are alike, so is the case with mutual funds. Responsible fund houses launch NFOs only when they are absolutely needed and try to do justice with all the schemes they launch.

PersonalFN rates the process-driven fund houses higher for having sound risk management. Unbiased research reports from PersonalFN are a great tool to gain insights into fund facts and investing fundamentals along with their prospects.

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