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WF: CY2016 has been a great year for the MF industry in terms of growth in AuM as
well as investor base. How do you see business prospects in CY2017 for the industry
and what do you see as the key business drivers?
Balasubramanian: I expect the strong momentum of CY16 to continue in CY17 with respect
to growth in SIPs as well as net inflows into equity schemes. I believe there will
be a significant rise in retail inflows into debt schemes in CY17, on account of
demonetization's impact on interest rates, surge in bank liquidity, absence of corresponding
credit offtake and the resultant decline in bank deposit rates. We could well see
retail debt inflows higher than equity inflows in CY17.
WF: If you were to look at BSL MF's report card for CY16, what would you say have
been the key achievements and what are some areas you would have liked to see a
better show by your fund house?
Balasubramanian: Continued growth in our equity book has been one of the highlights
of CY16 - we have gained a further 1.1% market share during the year - our share
now stands at 8.2%. Our SIP book has also grown well during the year - we now have
a SIP book of around Rs.450 crores from 13 lakh SIPs - which is around 10.50% of
market. Branch expansion has been the highest in CY16 and our contribution from
B15 locations has risen considerably during the year - which enhances breadth of
business. The biggest driver for all of this continues to be consistent investment
performance across all asset classes. We won multiple awards from different external
agencies for our equity as well as debt performance. CY16 has in that sense been
a great year of all round performance, which has enabled overall market share to
scale a new high of 11%.
If I were to look at misses of the year, one aspect we could have done more is in
the digital area. While we launched our BSLMF FinGo App and we ramped up activity
in social media, I think we could have done more in terms of creating the infrastructure
to support a significant digital thrust.
WF: What are your plans for CY17 on the marketing, product and distribution fronts?
Balasubramanian: Continued focus on market share growth in all asset classes will
be a key priority. Retail expansion will continue to be a big focus - we are planning
to open around 30 new branches.
On products, while we continue to get healthy flows in the large cap space, we will
put more emphasis on the multicap and the balanced funds and balanced advantage
segments. In fixed income, our key focus will be on building our retail base, across
all fixed income products.
I have also set a target for our team to raise the bar on customer service - to
distributors as well as investors. The focus will be on automation to enable us
to cut down turnaround times and thus enhance service delivery.
WF: A lot of effort is being put into ease of account opening (e-KYC) and enhancing
market access (Aadhaar based investments upto Rs.50,000). How do you see these initiatives
impacting business in CY17 and in what ways should distributors gear up to make
the most of these initiatives?
Balasubramanian: The MF industry has around 1.8 to 2 crore unique investors who
collectively have more than 5 crore folios. I believe this industry deserves to
have not 2, but 20 crore unique investors. When you think about that kind of scale,
you need a paradigm shift in terms of opening up the market. I think e-KYC and Aadhar
based investments will be big catalysts in this direction. Technology has to play
a central role in onboarding new investors at the scale this industry deserves.
Once the central KYC starts functioning for the purpose it was set up - and AMFI
has already sent some suggestions to it in this regard - that will be a good first
step in this direction. Demonetization has brought digital platforms into the limelight
- we need to capitalize on this focus on digital platforms and leverage digital
technology to onboard new investors conveniently and quickly.
WF: Distributors have an air of uncertainty on their business models consequent
to SEBI's consultative paper on RIA regulations - has it now been shelved or is
it still on the table? What is your sense on how intermediation will now evolve
in CY2017 and beyond?
Balasubramanian: In all the discussions that have been recently held with the regulator
- be at AMFI level or along with key distributor associations like FIFA and FIAI,
one common message that the regulator has given is that all forms of intermediation
must co-exist and that efforts should be made to expand distribution. RIA is one
of the forms of intermediation, and it will co-exist with conventional distribution,
and at the same time, efforts will continue to find newer intermediation channels
also.
The big thrust in the coming years, if you ask me, will be on technology enabled
distribution. Just as I mentioned that technology is necessary to onboard investors
if we have aspirations for a 10 fold growth in our investor base in the years ahead,
so also, technology will play a key role in enabling access to these new investors.
This means not only an opportunity for pure technology players like robo-advisors,
but perhaps more importantly, for conventional distributors to think of how they
can enhance their reach by 10 fold through adoption of technology.
On the RIA proposal, I am glad to note the healthy discussions that AMFI had with
FIFA and FIAI before each body made its respective submissions to SEBI. AMFI clearly
represented to SEBI that incidental advice is part and parcel of the normal distribution
process and therefore cannot be carved out from distribution. I understand this
was also the view shared by the distributor associations in their representations
to SEBI.
SEBI's International Advisory Board's views on migration from commissions to a fee
based model have been put up on SEBI's site for public consumption. The view clearly
is that while moving to a fee based model is a desirable end game, the journey has
to be calibrated carefully. There were some fears, as I understand, that the RIA
proposals may be implemented right away. But now that we have SEBI IAB's perspective,
the road ahead for implementation of the RIA proposals will be contingent on SEBI
doing an analysis of the market's preparedness for this move and the outcome of
this study. I understand SEBI will now undertake a wider survey on different aspects
of these proposals and any further development on the RIA proposals will be an outcome
of this survey.
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