Page 140 - DMGT512_FINANCIAL_INSTITUTIONS_AND_SERVICES

Unit 9: Mutual Funds

market conditions and adjust the portfolios from time to time according to their needs. In such Notes
advisory services, the emphasis is on building an ongoing relationship with the investor/s. In
India, given that mutual funds are relatively new, there is a low level of awareness amongst
investors about the working and benefits of Mutual Funds. Also, very few investors take an
organized approach to financial planning. Therefore, it is clear that the vast majority of investors
would benefit significantly from the value-added services enumerated above.

Basic Services

This includes providing the basic information on schemes launched to investors, assisting them
in filling application forms, submission of application forms along with cheques at the respective
office/s, delivering redemption proceeds and answering scheme related queries investor/s
may have. What investors receive here is convenience and access to mutual funds through
agents and employees of brokers who visit them and facilitate the paperwork related to
investment.
These services are also given through the branches and front office staff of AMCs and
intermediaries. These are transaction-oriented service where investors make the investment
decisions themselves, and rely on the AMC and intermediary mostly for execution and logistics
support.

Recommendations

1. While institutions can continue to be serviced by AMCs and intermediaries, it is proposed
that AMCs and the intermediary community focus more on individual investors and take
every effort to:

(a) Provide high quality advice and product information to such customers.
(b) Explain and position this service in such a way that clients recognize it as a specialized
and value added service, a task which may be difficult to accomplish on their own.

(c) Convince investors that the transaction and intermediation cost they are paying is
justified in lieu of the long-term benefits accruing from such counseling and guidance.
2. The Mutual Fund industry has to now take the more difficult but long-term sustainable
route of gathering assets from individual investors by providing them value added,
financial planning services and ensuring that Mutual Funds are an integral part of their
overall portfolio. Only if this happens will AMCs and intermediaries command higher
margins and levels of profitability, and not suffer from the low margins associated with
dispensing only basic types of service/s.
While doing this, the mutual fund industry in India should take care to ensure that:
(a) Each investor, institutional or individual, receives the exact level of service they
choose and correct advice based on clear and concrete facts and figures.
Correspondingly, the intermediation and transaction cost investors incur should
reflect the value of the service and advice they receive.
(b) Mutual Funds are accurately represented and appropriately positioned to investors,
whichever channel or mode they choose to invest in. The industry should safeguard
the investor's right towards correct description of the product, good service,
transparency and ability to take informed decisions.
(c) There is comprehensive knowledge and understanding of Mutual Funds amongst
all individuals instrumental in selling the Mutual fund schemes to investors
including employees of intermediaries, individual agents and financial planners.

LOVELY PROFESSIONAL UNIVERSITY 135