imgbd CEO Speak

Don't just think of doubling - plan for 10x growth in investor base

A.Balasubramanian, CEO, Birla Sun Life MF

In a nutshell

  1. Birla Sun Life AMC completed a highly successful CY16, with robust market share growth in AuM and SIPs, aided by strong all round fund performance across asset classes

  2. Bala believes CY17 can see higher retail flows in debt funds than even equity funds, on the back of demonetization and reduction in interest rates

  3. The industry which currently serves 2 crore unique investors, deserves to grow to a 20 crore investor base, says Bala. Technology is going to be a key enabler in providing enhanced market access. Distributors must intelligently adopt technology to enhance their reach by 10x and participate fully in the growth wave.

  4. All forms of distribution will co-exist says the AMFI Chairman. Implementation of the RIA proposals will be contingent on the outcome of a proposed SEBI survey on market's preparedness for the transition.

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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