The Indian Mutual Fund industry is worth nearly Rs 14 lakh crore today. If you think this is a massive, please don't ignore this fact—not more than 5% Indians invest in mutual funds. So you can imagine the real potential of the industry and scope for its growth. However, there are several hurdles in the path to gaining popularity and acceptance from Indian investors. Lack of awareness among investors and the existence of misconceptions are the primary reasons for the anaemic condition of mutual fund industry in India.
To overcome this, it was decided that mutual funds should keep aside 0.02% of their Assets under Management (AUM) and spend the same on investor education programmes every year. Later, the Capital Market regulator, Securities Exchange Board of India (SEBI), found that their actual spending was nowhere near the projected target. Therefore, it directed mutual funds to transfer 50% of the sum earmarked for being spent on awareness programmes to the Association of Mutual Funds of India (AMFI). The AMFI was expected to ensure that the money is spent wisely for the right cause.
It seems AMFI is doing no different. The first 4 months of FY 2016-17 are over, and it has not spent a single Rupee mutual funds transferred to it. In short, it's sitting idle on Rs 40 crore. Justifying the action of the industry body, the AMFI CEO said this, "Just because the money is there doesn't mean we can spend it arbitrarily. Since it is a sizable amount, the process has to be validated, as we are answerable to so many MFs." What he said is true without a doubt, however why AMFI didn't prepare itself to spend this amount effectively well in advance. The money hasn't come to AMFI overnight. It was pre-planned.
Some smaller mutual fund houses believe since they have been made to pass on the amount worth 0.01% of their AUM to AMFI, their budgets and their investor education programmes are getting affected.
Time and again, PersonalFN has written about this issue.
How Serious Are Mutual Fund Houses About Investor Education? .
What Money Won't Buy You? Investors' Trust For Sure.
The articles listed above tell you what the real problem is and why it can't be dealt with by just spending money.
At present, the AMFI and mutual funds will collectively end up spending over Rs 250 crore on investor education in a year, if they spend indeed. Some of the listed corporates do not have such large advertisement budgets. This begs the question is spending money the solution to creating awareness?
PersonalFN is of the view that, one needs to have a genuine intent to educate investors. It has demonstrated how one can run effective investor education programmes without spending crores of Rupees. Spreading financial literacy requires a far greater commitment, much 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 the layman on investments is a matter of trust , and trust can't be bought by squandering money. It has to be earned.
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