B-30 implementation formula is creating huge challenges

Ashutosh Bishnoi


Mahindra MF

  • Mahindra MF is at the forefront of the industry’s efforts to bring MFs to Bharat – to small towns across India, and someday hopefully to villages too.
  • Within just 2 years of business, it already serves customers across 350 cities and towns – and its focus on local languages is only going to enhance this penetration in the years ahead
  • Distribution in smaller towns is currently challenging – the changes in B-30 commission regulations and the continuing confusion on the formula implementation, is making B-30 business a loss making one for fund houses
  • With continued interest in MFs from small town investors, and an inadequate IFA network to serve them, we need quick resolution on the B-30 challenges, if we are to deliver MFs to Bharat, which clearly has the appetite, but is searching for guidance and execution support.

WF: Mahindra MF is clearly differentiating its communication strategy with a sharp focus on local languages, including the names of your schemes. Are you seeking to carve out a niche for yourself as Bharat’s fund house in the proverbial India vs Bharat divide?

Ashutosh: As far as Mahindra Mutual Fund is concerned its very reason to exist is to penetrate with the Mutual Fund products in smaller cities and towns of India. And hopefully in villages too someday! For us at the Mahindra Group the business opportunity has always been in the entire country, we don’t like to differentiate between Bharat and India.

We believe that Mutual Funds are like FMCG products, they need to be sold as a staple financial product to every Indian who has a reason and money to save.

WF: Are you planning to get your RTA communications and your website aligned with the local language thrust that your sales and marketing campaigns have adopted? Where do we as an industry stand on ensuring that an investor gets served in the language of her choice end-to-end?

Ashutosh: Certainly, that is also on the cards. I cannot speak for others, but the sense I have is that there is regulatory priority too on deeper penetration of Mutual Funds

WF: When you and your team travel extensively into B-30 towns, what is the sense you get from investors about their willingness to consider mutual funds? What are the biggest apprehensions you sense from such investors about mutual funds?

Ashutosh: We see no apprehensions. Only, access is limited. There are very few advisors or distributors beyond 100 cities. So, while investors are keen to consider an investment in MFs, they cannot easily find an advisor who will tell them which MF to invest in.

WF: To what extent do you see distribution in B-30 towns getting impacted by limiting B-30 incentives only to retail investments, withdrawal of upfront commissions and likely reduction in trail once the new TER slabs come into force? How might this impact business momentum from B-30 towns?

Ashutosh: The bigger challenge is currently due to lack of clarity on B30 formula implementation. Now we cannot pay upfront commission in B30 cities, however the recovery formula continues to assume upfront payments. So, only the B30 sales made in early part of the year provides any incentive to promote MFs in B30 cities. All the rest is a loss to the AMC. Fewer AMCs will want to continue doing business on this basis.

WF: What is the long term vision of Mahindra MF? Where would you like to see your fund house 5 years from now and what key metrics will you judge your progress on?

Ashutosh: We don’t set any AUM goals, because our priority is something different viz reach the smallest investors in smallest of towns. So, our goals are continuously focusing on more number of cities and more investors from such cities. Currently our investor base from B30 towns is 30%, which in comparison to the rest of the MFs is quite high. We already get money from over 350 cities – again this is not usual for a 2-year old MF House.

WF: When you look back at the journey of Mahindra MF so far, what would you say have been the biggest hits and probably some of the notable misses? How do you plan to address these misses?

Ashutosh: We have been very successful with penetration thanks to the IFA network, and our strategy to use local language has paid off very well. What we not need to do is to lean on the Mahindra Finance network and find clients from among our parent company’s base of over 5 million customers.

WF: How do you propose to win distributor mindshare in this competitive market place?

Ashutosh: Our goal is to reach small towns, and in doing so our engagement with the IFA community is the highest. Large distributors don’t reach small towns yet. Our connect with IFAs is via their own Associations’ activities as well as through our regular contact programs using local languages in our meetings. In small towns IFAs are educated but not quite conversant in English, so they welcome when we speak their language.

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