The recommendations also include channelising household savings into mutual funds for long term wealth creation.
Mutual fund houses are going through a rough phase due to credit crisis and expectations of an economic slowdown caused by a novel coronavirus, or COVID-19, induced lockdown. Returns have fallen to a low single-digit over the last three years, thanks to the recent meltdown seen in equity markets.
In this backdrop, the Confederation of Indian Industry (CII) organised Mutual Fund Summit 2020 and recommended certain action points for the industry to ensure all-inclusive growth over the long term.
“Despite ongoing challenges and several obstacles in the last decade, the Indian MF industry has seen growth in three core areas – assets under management (AUM), investors and overall regulatory environment,” Sundeep Sikka, Chairman- CII Mutual Fund Summit 2020 and Executive Director and CEO of Nippon India Mutual Fund, said.
Though the sector is expanding now, the industry body feels growth needs to be more sustainable.
- Greater use of technology in the mutual fund industry to ensure better customer experience.
- Employing technology across the mutual fund value chain is expected to help funds reach out to additional investors and cut down on costs.
- Reduction in costs, if passed on to the customers in a competitive environment, benefits customers (investors in mutual fund schemes) in terms of higher returns.
- Channelise household savings into mutual funds for long term wealth creation.
- Absence of simple on-boarding process is a big hindrance in new mutual fund account opening. The process need to be streamlined. Use of technology can simplify the on-boarding processes and thereby facilitate individual investors to access mutual funds.
- Each month around Rs 8,000 crore is invested in mutual funds by way of systematic investment plans, as per the data released by Association of Mutual Fund of India. Though the mutual fund industry has unveiled facilities such as video based KYC to onboard the new investors, a lot can be done to improve investors interactions with mutual funds by standardising the processes.
- Simplified onboarding process for new investors and continuous engagement with existing investors is the need of the hour. User interface simplification and automation of backend processes need to be done to improve customer experience.
- Though there is a definite shift of investors from physical assets to financial assets, new categories of investors will emerge over next decade. These would include digital savvy millennials, women and elderly. The mutual fund industry need to think of new products to cater to their specific needs and have to change the way the products are marketed. The distribution network too also need to be enhanced for the same.
- The report emphasised growing importance of self-governance and the use of modern technologies such as artificial intelligence and data analytics in self-governance of the mutual fund industry.The report points at the ongoing credit crisis in India that has put downward pressure on financial services in India and it is difficult to estimate growth for the next two to three years.