13th March 2012

The Chennai Super Kings team is widely regarded as one of the strongest in the IPL and has a great track record to prove it. In the forthcoming IPL-4, CSK is scheduled to play 16 league matches between April 4th and May 17th. Getting an early winning momentum and putting up points on the league table early on is vital to put pressure on the opponents - as we all know. That's what the CSK team has done well in the past editions of IPL. Now imagine a situation where the CSK team management decides - for some inexplicable reason - not to play its first four league matches this season, and directly start participating from its fifth match scheduled on April 14th. And then - after sitting out for the first 10 days for no apparent reason - it expects its players to play wonderfully, not get pressured by not having any points on the board, win almost all of the remaining league matches and still qualify for the knock-out round. Sounds like a reasonable expectation ? What do you think will be going on in the minds of the CSK players if their team management asks them to sit out for the first 10 days of the tournament - and then do wonders after a delayed entry? Frustration at helplessly watching the opposition pile on the points while you sit cooling your heels in the hotel room? Despair about this strange management inaction?

Why is the MF industry sitting out in the crucial initial league games?

That pretty much sums up the sentiment of members of DFDA - the influential set of North India based IFAs. Here's what Ashish Goel of Vista Wealth - a leading Delhi based retail advisor and key member of DFDA shared with me a few days ago.

Ashish observes that in the Delhi-NCR region alone, there are around 100,000 young professionals each year who take up their first jobs in large and medium sized organisations, with a typical salary of Rs. 20,000 per month or above. Naturally, every financial product seller vies for the attention of this young saver - catch 'em young is the buzz word of every marketer, isn't it? But strangely, if you look at the products that this young professional is exposed to in the first 6 months of his career, the one glaring omission is the mutual fund - a strong product with many good attributes - but its simply not out there in the early stages of his financial life, when opinions and biases are formed - when points are being put on the board by competing products.

Young salary earners exposed to multiple financial products - but not to MFs

The very first financial product he is exposed to is the bank savings account as part of the corporate salary arrangement of his employer. Along with this comes a strong pitch on "un-fixed" deposits and cluster deposits of the bank. Then come the free credit and debit cards, again from the same bank. Then you have solicitations for home loans, car loans, personal loans - again from his bank. Then he gets calls from an RM of the bank for life insurance products. During tax season, he is either offered an insurance product as a tax saver by the RM or he has the payroll processing outsourcing agent who also doubles up as a PPF agent, who convinces this youngster to open a PPF account to save tax.

The next thing that finds its way into his mindshare is solicitations to open a broking account for free and start trading - almost for free. And then, says Ashish, the most galling aspect is that several lifestyle sellers somehow find their way into making strong pitches to new employees - these include club memberships, movie / bowling memberships and adventure / holiday packages. So, that's the scenario : in the early stages of his financial life, this young first time salary earner has been exposed to several savings products, protection products, investment products, trading products, loan products and lifestyle spending related products. The one glaring omission in this impressive list : the mutual fund - which most of us believe is among the best investment avenues for all investors - big or small.

Other product sellers have found solutions for worksite strategies - why not MFs?

Ashish says that while almost all of these product manufacturers have focussed worksite marketing programs which they execute in association with their respective distributors and agents, he has yet to see any concerted attempt by the fund industry to similarly introduce its product to these first time savers in the early stages of their financial life. Its just like a strong team sitting out in the initial league games and then trying to jump into the action - perhaps a bit too late - after competition has already put up points on the board in terms of impressions and opinions already formed by these young savers and spenders. The question to be addressed here is simple : if banks are happier cross-selling either their own products or insurance products but are less keen to cross-sell mutual funds to this set of first time salary earners, does that mean that mutual funds should remain a mystery to these new savers? Shouldn't the MF industry find ways of approaching these prospects? If clubs and travel agencies can find a way to get in, surely the MF industry has much better credibility and standing with these corporates.

Urgent need to teach young salary earners the basics of financial responsibility

The bigger worry for Ashish is the fact that with these product pitches of all sorts, the young impressionable minds often get tempted into reckless financial behaviour - whether in the form of jumping into trading before understanding investing or spending recklessly lured by lifestyle choices and easy loans, without any thought about being financially responsible. These early actions often leave financial scars that take a long time to heal.

Ashish, along with his fellow DFDA members believe that its time that the MF industry and committed distributors come together to find remedies to this situation. Its time to get out there onto the playing field rather than sitting helplessly in the dressing rooms, watching others play and win.

Here's how to get on to the field and play the game - now !

Here is what Ashish proposes as a line of action :

AMCs who wish to get out there onto the playing field should first prepare an engaging presentation that educates young salary earners about being financially responsible first. The three steps to financial nirvana should be responsibility first, followed by awareness and finally culminating in financial literacy. The presentation should spell out the dos and don'ts for an inexperienced first time saver and guide him towards a sound financial future. Mutual funds can be introduced as one of the avenues that help him build a sound financial future. But equally, the perils of acting irresponsibly with his new found money must also be highlighted. A presentation on financial responsibility - without making it too much of a plug for mutual funds - will also go down well with the HR departments of these companies, as they should be happy that credible names are willing to offer a beginners guide to financial responsibility to their new recruits.

1. If like minded AMCs get together to prepare a standardised presentation, that would be great. If they would like to create this under an umbrella branding of AMFI to showcase neutrality, that would be super. But, execution must remain the prerogative of individual AMCs. The point here is that different AMCs may have differing levels of appetite for a concerted worksite marketing initiative. Its pointless for AMFI to allocate targets to all AMCs - like we've seen with the investor education seminars. Far better that a generic presentation be prepared under AMFI's banner and circulated to all AMCs - who can then take this and run as hard as they individually want to with this.

2. AMCs who want to get onto this playing field should dedicate staff in all key cities for year-round worksite marketing campaigns, without any sales targets, but with activity level targets. The sole objective of this will be to ensure that you reach out to as many young salary earners with an educational presentation on financial responsibility.

3. These worksite programs can be conducted jointly with distributors who are willing to partner in these activities on a sustained basis. These distributors can then follow up with attendees to create financial plans for them and guide them towards appropriate savings and protection products based on their needs.

4. Most AMCs have strong corporate and institutional relationships, thanks to years of managing liquid assets for them. To begin with, AMCs can draw up a list of such companies where they have strong relationships and prevail on these managements to allow them to address all young staff members at an agreed periodic interval at all cities where the organisation has teams. That's the low hanging fruit that can certainly be tapped - right away.

5. Distributors can also set up such presentation sessions where they can, and invite AMC partners to make the presentations, with follow up being entrusted to the concerned distributors.

6. A sustained effort with a high quality educational program, run under the aegis of AMFI but executed by individual AMCs should result in this program becoming over time, a part of the induction course for all new employees in all major organisations across the country. If we reach that level, we would have made giant strides on retail penetration - which is the biggest challenge for the industry today.

7. The concept of worksite educational presentations can be extended to many other avenues - like large housing complexes, colleges, social organisations etc. But, clearly the low hanging fruits are the medium and large sized organisations that take in several young professionals each year onto their rolls. That's what needs to be tapped first.

Ashish is all padded up and ready to get on to the field…

Ashish has padded up and is keen to get on to the playing field rather than sit helplessly in the dressing room, watching others play the game and win. What he and his DFDA colleagues are looking for are AMCs who will pad up with them and go out and play the game - in a serious and committed manner.

What do you think?

What do you think of Ashish Goel's idea? Is this an initiative that is worth executing? Will a sustained effort in this direction help drive retail penetration? Are you willing to pad up in your own city and look for AMCs to partner with you? Are you willing to commit time and resources to a sustained activity of this kind? Are you willing to get onto the playing field and compete? Share your thoughts with fellow advisors and your AMC partners by posting your comments in the box below - its YOUR forum !