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WF: When you look back over the years, in what ways have products and the way we communicate them evolved? What more do we need to do on our products and their communication to align better with investor expectations?
D P Singh: I think the biggest shift we are seeing is the move from manufacturer and distributor oriented products to investor oriented solutions. Not only is there a continuing effort to provide good returns, but there is a very conscious effort to provide relevant investor centric solutions. I think the challenge for the industry continues to be the way we communicate these solutions to our investors. Our communication hasn't kept pace with product development, which means that the way we are communicating these are so complex that investors don't really relate to them as solutions for their investing needs. We have a long way to go for communications to catch up with product development.
Take for example the equity savings funds category. It is such a beautiful product combining asset allocation and tax efficiency which allows for inflation beating returns for relatively more conservative investors who don't want too high equity exposure. It is a proposition that should appeal to millions of Indian savers. It is a category that should easily scale up beyond Rs. 1 lakh crores AuM. But it is still less than Rs.10,000 crores. Now, is that because of bad design - no. Bad performance - no. Weak dissemination - yes.
On the other side, take balanced funds. Somehow, the communication into the market seems to be that balanced funds are relatively safe, and a lot of money is flowing into this category on the perception of safety and continuity of monthly dividends. We know that the category cannot be bracketed into one. There are funds in this category where the portfolio is quite aggressive, some moderate and some conservative. Hence communicating that balanced fund has a balanced portfolio is not correct. Still the category has become so big.
That said, things are evolving rapidly. We have moved forward on all fronts in the past few years and we as an industry will continue to work towards ironing out these communication issues. The issues we talked about 5-10 years ago are no longer there, similarly, issues we are currently facing will also be tackled and resolved as we go along.
WF: You are perhaps the first fund house running a huge campaign on promoting the concept of Systematic Withdrawal Plans. What is the rationale behind this initiative?
D P Singh: SWPs are not new - but they have never really been communicated strongly and consistently to investors. SWPs are almost magical in the manner they can provide very tax efficient regular cash flows for those who are in the drawdown phase of their financial plans. For retirees, SWPs offer very tax efficient and convenient cash flow solutions - which not only minimize tax, but also help them avoid hassles of collecting TDS certificates etc for interest income. With today's healthy salary levels, even middle rung executives retire with at least 30-50 lakhs in their kitty. Interest rates have come down and deposits do not provide adequate post tax return for their needs. The opportunity to mobilize assets from retirees is huge, if we build awareness of the concept of SWPs.
As an industry, we have marketed SIPs very well. But we have failed to complete the loop. The loop gets completed when we popularise SIPs in the accumulation phase and SWPs in the drawdown phase of investors' financial journeys. Both need to be equally promoted.
Our industry focuses a lot on youth. While youth is indeed a very important customer segment, we believe we are not doing adequate justice to popularizing solutions for senior citizens - who have already accumulated some wealth and are looking for prudent solutions to generate reasonable post tax cash flows in a declining interest rate environment. We are very passionate about reaching out to them and building awareness of solutions like SWP on mutual funds.
WF: You have seen distribution very closely for many years. What are the biggest trends/changes that you have seen in fund distribution? Looking ahead, what would you say are the key aspects we need to strengthen in distribution, to serve investors better?
D P Singh: The change has been phenomenal. I mentioned about products evolving into investor centric solutions. More than products, I think distributors have evolved very well from a product orientation to a client orientation. Majority of distributors today do not just sell products - they understand the client needs and suggest suitable solutions for each client. The kind of communication and conversations distributors have today with their clients is vastly different from what was seen even 5 years ago. I salute the distribution fraternity for the efforts they have taken to evolve so successfully into truly investor centric intermediation.
If I were to look at an area of strengthening, it would be in adopting digital technology to scale up and seize the huge growth opportunity. Digital adoption is still a little patchy - some have embraced it fully and are reaping the benefits in the form of accelerated growth. Others are still a little tentative about embracing digital technology. Digital is the growth mantra for the future. Given the growth prospects for the industry, remaining in physical mode is going to come in the way of your growth - no two ways on this. Its really a case of sooner the better on embracing digital as a way of life.
WF: In what ways are you aligning your sales processes and sales teams to work closer with distributors in helping them deliver superior investor experiences?
D P Singh: The first step in this direction was to upskill our own team to ensure that the quality of engagement with distributors meets and exceeds their expectations from us. Towards this end, we have equipped every RM in our team with tablets - which not only enable them to provide all the information our distributors need from us accurately and instantly, but go much beyond, with a tool called Darpan. With Darpan, our RM is able to not only share with the distributor details of his business with us, but is also able to help the distributor understand his market dynamics a lot better, so that he can make his plans intelligently and prudently.
We have launched this facility on our distributor portal also, and here it is even more granular. Distributors can chalk out their area of operations, and get all market dynamics for their specified area. So, if there is a distributor who sees as his catchment area the suburb of Andheri in Mumbai, we can help him with data at a pincode level for Andheri to help him understand market size, key players and his own share. Understanding market dynamics is the first step towards making sensible plans to grow your business.
We are committed to investing in such tools that add business value to our distributors.
WF: What is your message to distributors as SBI MF prepares for its next decade of wealth creation?
D P Singh: A big thank you to all our distributors. They have supported us all the way in this 30 year journey of SBI MF. We could not have achieved what we have, without their strong and continuing patronage. We cherish the support we have received from all distribution channels - our IFA partners, NDs, banks - everyone has put their faith in us, which is why we stand where we do today. I say this with great humility - we have grown from 100,000 cr AuM in Oct 2015 to 190,000 cr in less than 2 years. This growth would not have been possible without them.
As we prepare for the next decade at SBI MF, we want to reinforce our commitment to work even closer with our distributors. We remain committed to grow with them and God willing, the industry tailwinds should provide ample growth opportunities for all of us in the next 10 years. We have a vision for the next 10 years to become the fund manager to every Indian, just as our parent Group has today realised its vision of becoming the banker to every Indian.
My final thought for distributors is that all of us - in the manufacturing side as well as distribution side - need to constantly invest in knowledge and in upskilling ourselves. Those who do this have a very bright future ahead of them in the coming 10 years.
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