WF: Congratulations on the launch of MF Utility! You have been meeting distributors across the country, and have been receiving feedback. There are a number of perceptions that are being formed within the distribution fraternity, and some of them have come out quite clearly in our recent Wealth Forum Advisor Confidence Survey. I would like you to respond to some of these perceptions, to enable all of us to understand on-ground realties better.
The first perception is that MF Utility is like a slow train in a world where we are talking of bullet trains. It took years to launch MFU, and after a long wait, phase I has hardly anything to show for itself, compared to say exchange platforms that started being built much later, but have already rolled out comprehensive platforms.
Ramesh: Thanks Vijay for giving this opportunity for us to clear the air on some of the myths and misunderstandings that seem to have come into some distributor minds.
You need to understand that this is a new entity that has been set up and not a new project by an existing entity. And, this entity is built on a co-operative model, bringing in all major AMCs into its fold. This is the first of its kind entity in the word and we took a call early on that the entity and the system will be SEBI regulated. We volunteered to be regulated by SEBI. Since this is first of its kind, it took a while for SEBI to figure out under what regulation MFU should ideally be registered and regulated, but we worked with them on this to ensure that every step we take has regulatory approval and that SEBI is fully aware of what this System intends to do. This initial effort takes time, but believe me, in the long run, having this clarity on the regulatory framework for MFU will be a big plus point.
We had a Committee which met every week to design the system which was a path breaking and game changing one. The Committee Members deserve a BIG thanks and appreciation who, besides their regular work in their organization spent about 3-4 hours every week to create such a one-of-its-kind system. You talk about exchange platforms. Unlike MFU, these applications that are built by existing entities and it is only an improvised version of their earlier avtaars. Ours is a brand new entity that had to be first created - collectively, and then the application contours had to be agreed - again collectively, and then it had to be approved by the regulator, and then only system development work commenced. Besides, you must also appreciate that our System was more comprehensive one providing all kinds of transactions whether it is purchase, redemption, switch, SIP, STP, SWP etc. From the beginning we had the features of Overnight Liquid funds, switches, etc, which these platforms did not have when they launched.
WF: What features are available in phase I which has been launched, and what more can we expect from subsequent phases?
Ramesh: MF Utility primarily acts as a bridge between the transactor and the processor. The transactorcan be a distributor or an investor and the processor is the Transfer agent, i.e. RTA. MFU will not become a transfer agent at all at any point of time. We are only an industry infrastructure. But, being a bridge for the entire fund industry means a whole new level of convenience for the transactors when they use MFU for all mutual fund transactions - financial as well as non-financial, including registering complaints. This convenience comes primarily from the fact that orders/instructions can now be aggregated across all major fund houses, on a single form / single screen, with a single cheque, rather than replicating similar transactions across many fund houses.
Let me first take you through the offline mode, which is what most distributors in India use today. For years, distributors have been asking for common application forms, common transaction forms and common service forms across fund houses. Now, with MFU, you have all these facilities and common forms. Any distributor can walk into any R&T office, to submit any transaction - purchase (including NFO), redemption, switch, STP, SIP, SWP, non-financial transaction, even complaints. The distributor does not need to register with MFU and get his log-in ID and password to use our common application and transaction forms. Please go ahead and start using MFU forms instead of forms from individual fund houses. You will save yourself a lot of time and effort, and the industry will save on paper. It's a win-win for everyone!
You can stop carrying forms from multiple fund houses to your client meetings. Just carry a set of MFU forms, and fill in whichever schemes from whichever fund houses that you agree with your client, and get a single signature from your client on a form that may have 5 investments in five different fund houses.
Another benefit: when you submit an MFU form to an R&T office, you now don't need to worry about whether that R&T serves the fund houses whose funds you wish to transact in. You can submit an MFU form in one R&T's office, for schemes that are administered by them or by another R&T agent. All R&T offices will accept MFU forms regardless of whether they serve the underlying fund houses or not. You do not need to run between two or three R&T offices each day, making sure that you are submitting the right forms in the right office. Thus the current front offices of the RTAs become a neutral entity.
All these benefits are available today to every distributor - and you don't have to register with MFU to avail these benefits! At the recent CII Mutual Fund Summit, I heard a distributor ask a panelist when the industry will come up with common forms. Friends, you already have common forms through MF Utility- go ahead and use them! There was another request from a distributor in the CII Mutual Fund Summit that industry should have one mobile app for distributors. MFU will provide a single mobile app for distributors in the next couple of months.
We have created two types of forms - CAN transaction form and folio transaction form. CAN is the Common Account Number of the investor. Once an investor's CAN has been created, all the benefits that I have articulated above will be available to the transactor - this could be the distributor or the investor.
If a CAN has not yet been opened, a distributor can use the Folio Transaction form for additional purchases, redemptions and switches across several schemes within the same folio of the investor. Folios are obviously AMC specific, and therefore you cannot use this form for transactions across multiple AMCs. In order to get the full benefits of MFU, distributors should get their client CANs set up.
Now, lets look at the second mode of leveraging MFU. A distributor can register with us, take a login id password and he will be able to put in all these transactions sitting in his office, scan and upload the transaction and submit the document subsequently. The moment he scans and uploads the transaction, the transaction is electronically time stamped. I see so many distributors do 2 or sometimes 3 rounds every day to at least 2 R&T offices, submitting forms for processing. There is always a worry about meeting the deadline for time stamping. Now, you can sit in the comfort of your office, upload all transactions during the day, get them electronically time-stamped immediately, and then plan a visit to one R&T office in the evening before 6 pm.
I would like to share some statistics to help our distributor friends understand the benefits of MFU - whether in the offline or the online mode. Its still very early days for MFU, but we already have over 11,500 CANs that have been opened. Here are some insights from the first 11,500 CANs:
Average folios mapped per CAN is 9. This means on an average, investors have 9 folios across all fund houses where they have invested. Now, instead of having and maintaining 9 folios, distributors will need to maintain only 1 CAN per client. On average, these 11,500 investors whose CANs have been opened, are invested across 5 AMCs on an average. Distributors will now have only one common transaction interface rather than multiple interfaces to deal with these multiple AMCs for their client transactions. There are on an average 2.5 transactions per CAN transaction form. This means that for distributors, instead of filling up 2-3 forms, they are now filling only 1 form per client with a single cheque. Think of the reduction in distributor effort and the reduction in paper across the industry, besides reduction in the processing of 2-3 forms For SIPs, the average is even better - at 3.5 SIPs per CAN transaction form, on average. These 11,500 CANs have been opened for investors in over 750 cities, of which over 300 cities and towns are currently beyond the coverage of our R&T agents or AMC offices. That's the reach of MFU - and, we have only begun the journey.
WF: That's really an eye-opener - especially the benefits in both the offline and the online modes and the insights from the first 11,500 CANs that have been opened. One big worry that many distributors however have is that it is exactly this convenience which will make transaction execution far simpler in direct plans too, which will promote growth of direct plans. When you have a price advantage and fantastic convenience, more investors will prefer to go direct. Many distributors therefore view MFU as distributor unfriendly - especially compared to exchange platforms where investors cannot trade directly.
Ramesh: There are some myths here that I want to clarify.
MFU is not a platform - it is a transaction aggregation system. The objective of MFU is to aggregate and digitize mutual fund transactions across the industry. Aggregation and digitization will help everybody who is involved in the transaction - the investor, the distributor, the R&T agent and the AMC.
MFU is not competing with any platform. Platforms would provide lots of pre-sales information to the distributors like, fund performance, comparative performance of funds, recommended schemes, research reports on the market / economy, besides helping the members of these platforms with sales tactics and helps. MFU will not provide any such help. MFU is purely an execution system. Therefore, those who need the pre-sales support, they need to reach out to the platforms. Those who are self-sufficient with regard to pre-sales, they can use MFU. The bottomline is that the mutual fund industry is interested in aggregating and digitizing its transactions, to build scalability. Any initiative that is aligned with this goal, is a welcome initiative. Moreover, those distributors who have their own website and transaction portals can just align with MFU System and have their transaction uploaded at one place, besides, if they desired, we can provide white label solutions.
MFU is not a marketing platform, leave alone direct marketing, nor is it a distributor marketing platform. When a CAN is opened - whether by a distributor or an investor, MFU does not send out any kind of marketing material to the investor, encouraging him or her to use MFU directly. MFU offers exactly the same set of conveniences for every transactor, whether the transactor is a distributor or an investor. There is nothing in MFU that promotes one against another. Our job is to promote convenience of mutual fund transactions in the industry. Our goal is to be transactor friendly. This means that we will endeavor to be distributor friendly as well as investor friendly. We are just a bridge between the transactor and the transaction processor. We do not in any way promote any one way of transaction versus another.
In fact, when you talk about some distributors perceiving MFU as anti-distributor, I have also come across rumours that suggest that with MFU, an investor can change his entire existing AUM into direct plans with just a click of a button. Let me reiterate - MFU does not favour one set of plans over another. There is no change whatsoever in the rules and procedures currently in force for an investor to shift his portfolio from regular plans to direct plans. Whatever are the rules currently in force, are equally applicable with MFU. Therefore, no investor can transfer the portfolio into direct by a click of a button.
WF: What are the kinds of reports that distributors and investors can get from MFU? Will they be able to get capital gains summaries, annual transaction statements etc that can facilitate tax return filing?
Ramesh: These reports are scheduled for phase two, which should go live before December 2015. As of today, here is what a distributor can do with MFU:
Open a CAN for a customer, which means the investor can instantly start transacting with 25 fund houses Do KYC registration through the CAN - just once, rather than multiple times Transact offline or online, as explained earlier View transactions, order status, payment status. Utilize our centralized complaints system which allows him to send in a complaint or query for any of the 25 fund houses that are participating in MFU, and track status of each complaint / query.
By December 2015, when phase II goes live, distributors will have access to a distributor dashboard. Distributor dashboard will be available for every distributor whether small or large. Distributors will be able to see AUM by fund house, AUM by product category, his AUM versus industry, his market share, his transactions, market share of his transactions, his top investors, top 10 schemes by AUM, top 10 investments by amount, top 10 redemption by amount, SIP expiring list, FMPs maturing list by customer, and so on. The dashboard is an exhaustive business MI pack that will give distributors a real time pulse on key business metrics, to enable them to have better control on their business. Effectively giving him more time for business than operations.
Capital Gains summary will also be available. Common Account Statements will be available by a click of the button. Distributor can submit these request by clicking the button and these statements will be sent to the investor instantaneously through email. We do not facilitate tax return filing. This is a facility that is provided by platforms because tax returns contains information beyond mutual fund investments.
Another key feature that MFU will provide to distributors is that it will enable distributors who have transaction enabled portals for their clients, to white-label MFU and integrate it into their own customer portals. Their clients can therefore transact conveniently on MFU, but through the distributor's portal. There is a small one time set up fee that MFU will charge distributors to facilitate this white labelling and integration.
Our consolidated data feeds to distributors will be a single format, single feed across 25 fund houses. This takes away some of the pain distributors experience today, when data feeds come from different R&T agents in different formats.
Then, we have a distributor facilitated call-and-trade facility. An investor can call his distributor with transaction instructions. Distributor will key-in all the transaction instructions into MFU. MFU will send email and SMS to the customer as a transaction alert, customer approves it and the transaction gets processed. This transactions happens without any paper.
As you can see, there is a lot that distributors are getting today, and a lot more benefits coming their way with Phase II. I have a simple message to distributors - why don't you start experiencing MFU and then decide whether it is of benefit for you or not. Open CANs for your customers, start using MFU, experience the convenience, and then judge for yourself.
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