imgbd CEO Speak

Promote SIP + SWP as lifelong solutions

Anuradha Rao, MD, SBI MF

1st August 2017

In a nutshell

Speaking on the occasion of SBI MF completing 30 years of wealth creation, Anuradha Rao looks back at how the fund industry and investor expectations have evolved over the years and what lies ahead of us as investor expectations continually evolve.

SIPs are a remarkable success story for the industry, but the next wave of growth can be unleashed if we promote SIP + SWP as lifelong solutions and make mutual funds relevant for every stage of the investor's life, including post retirement, she says.

There is an increasing set of new investors coming into the fund industry who are not looking only to maximize wealth through equity funds, but are looking for inflation beating returns with low volatility - we need to cater to this rapidly rising new investor segment with appropriate solutions.

And finally, the sizeable numbers of investors opting for online investing may well need virtual guidance to help them complete their investment journeys successfully - we need to think of how we can cater to this likely need in the coming years.

WF: Congratulations on SBI MF's very significant milestone of 30 years of wealth creation. Your fund house has one of the longest track records in India of helping Indian savers become successful investors. In what ways have investor expectations evolved over these years and how is your fund house keeping up with this evolution to continue meeting investor expectations?

Anuradha Rao: Thank you for the good wishes. We are very happy to be celebrating our 30th year in this business. It has been a privilege to be part of this industry and in a sense being one of the pioneers in bringing mutual funds to the Indian investor. When we started our journey, we launched closed ended assured return products - that was the regulatory regime back then. Its unthinkable today to have assured returns in mutual funds - we've come a long way indeed! From there, we progressed to open ended equity funds as regulations evolved and investor appetite grew for such products. Then tax law changes prompted product innovations in dividend plans and tax savings products.

In terms of orientation, SBI MF has evolved from a product orientation to a solution orientation. We have a tool on our website called Family Solutions, where investors or our distributors can create an appropriate solution based on their needs and circumstances, by picking a bundle of products from us that are suitable. Our communications are evolving from pitching products based on their track record to encouraging our partners and our investors to consider solutions that are appropriate for them.

In terms of investor expectations, I think in part because of our industry's communication focus on returns track record, investor expectations around mutual funds centred around returns from products. Then we went through a phase where propositions became the USP - like SIPs and STPs, and then more complex propositions like trigger based actions and so on. I think we are coming back from that phase of complexity to simplicity now - where the focus is on simple solutions for their financial goals.

Beyond products and propositions, investor expectations are also rapidly evolving around how they want to access these products and propositions. They want a convenient onboarding process, they want convenient transaction processes and quick and efficient reporting processes. So, the work we are doing on our website and our partner portal is aimed at just that. Easy KYC, online transaction execution and payment through multiple formats including debit cards, UPI, net banking etc - these are the key focus areas and digitization is the only way forward to deliver convenience that investors expect.

WF: Retail penetration efforts for the fund industry over the last decade have been led by the equity fund SIP proposition. What do you see leading the next wave of customer acquisition for the industry and how is your fund house gearing up for this?

Anuradha Rao: We are really excited to see the growing retail interest in mutual funds. We also believe that SIPs are indeed the most appropriate way to onboard new investors into mutual funds. SIP is a collective industry victory. The entire industry put its energy, imagination and money into promoting the concept of SIPs and today, when we see that SIP has become a household investment terminology, when SIP is seen as a product rather than an investment mechanism, it is indeed a feather in the industry's cap.

Just to share our own experience with SIPs, today we have 20 lakh SIP folios and a monthly SIP book in excess of Rs.500 crores. At the current pace of growth, this book looks set to double in less than 2 years. We are adding about 18 lakh folios a year - and 60% of these are SIP folios.Clearly we have a meeting happening between customer needs and product structure - which is what is catalysing this growth.

One of the fallouts of rapid growth is its impact on the operating platform. We need to overhaul our operating platform to make it efficient and scalable and capable of smoothly servicing this rapidly growing customer base. We have an internal project called Sankalp, where we are streamlining and rationalising our processes to ensure ease of customer onboarding and servicing, to ensure scalability. We believe this is as important as customer acquisition because unless we are able to onboard and serve this new customer on a sustainable basis, who has placed his faith in us and has come to us, we will lose him, and his goodwill which today is attracting his friends to us too.

Now SIPs are a great way to invest in your accumulation phase. I believe equal attention needs to be given to those who have completed their accumulation journey and are now drawing down from their accumulated money to generate cash flow post retirement. This is where SWP comes in as a tax efficient way of creating those regular cash flow requirements post retirement. I believe we need to move ahead from promoting SIPs to promoting SIPs along with SWPs as end-to-end life long solutions. I believe this life long positioning is what will bring the next wave of investors into the industry and will ensure that our industry remains relevant to the investor through all phases of his life.

WF: In what ways do you see investor expectations on products and service changing in the coming 5 years and how are you aligning your business towards this?

Anuradha Rao: I've talked about simplicity of solutions being a key expectation. Beyond this, I believe that the incoming set of investors into the industry have slightly different set of expectations as regards the outcome. I don't think they are looking at purely returns (ie the highest return possible), they are looking for inflation beating, tax efficient returns over the long term. So what they are really looking for is something that provides a little higher return than FDs, with a very moderate level of risk. They are not looking for a product that will make them worry about markets daily and their impact on their NAVs. Products like MIPs in the open ended format and dual advantage funds in the closed ended format are geared to deliver to these expectations and can boost their confidence in mutual funds and their ability to help them meet their financial goals.

In terms of service, we have to gear up for all modes - there is a set of investors who will continue to prefer human touch, there is a youthful segment that wants everything on a digital platform. But somewhere down the line, I believe, the nature of the product is such that even this segment will at some stage see value in a human element, from time to time.

So, while we build our capabilities to digitally onboard new customers and digitally serve them for routine matters, we need to also think of engaging with them proactively in offering them appropriate solutions as well as reach out periodically to help them take stock of their investments and help them determine whether changes are required to align their portfolio with their changing circumstances.

Now, this is exactly what a distributor or an advisor does in the physical mode. When investors come through distributors, they get this ongoing guidance. For those who don't come through a distributor, I see a need evolving in these customers for guidance at some stage. This is a gap that needs to be addressed. Virtual guidance - say through a telephonic route - by people equipped to do this job, is a solution that needs to be created for this emerging client need. Many of these investors may not realize it today, but they are going to need guidance. We need to proactively find solutions for this emerging need.

And lastly, credible retirement income solutions is a need that has now emerged with the fall in deposit rates. We need to cater to this need on a priority basis.

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