The Hindu Business Line : Fund houses should be more agile in educating investors

Why, you might wonder, are we discussing news items that are already in the domain of public knowledge? The answer is simple. Even in this day and age, when one expects the investor fraternity to be conscious about such things, a fund house has to make a special effort at advising its clients that they should actually separate the wheat from the chaff.

The immediate reason why we are referring to this is a single-page note that has accompanied account statements sent to investors. It is not that Tata Mutual Fund has talked only about this matter and little else. Instead, the note runs on familiar lines, complete with such humdrum messages as `thank you investor' and `long-term value'. Yet it also urges investors (in bold letters) not to confuse it with some of the conventional tax-saving instruments.

The point is there is widespread financial illiteracy; something that affects, among others, asset management companies too. No statistician can ever measure it, nor can a single organisation change the situation for the better. But while large sections of the market are not doing themselves any favour by staying financially illiterate, fund houses are doing precious little to plug the information gaps that have become so evident.

In case you are wondering what mutual funds can do, here are just two things that the market can genuinely ask them to deliver. One, they must work out well-organised programmes for furthering investor education on a sustained basis. Nothing much happens on this front, despite the right noises made by AMFI, the industry association, and CEOs of AMCs, many of whom often speak to the media on the subject.

Two, fund houses must not give in to those distributors who insist on perpetuating malpractices. This, as we all know, is an age-old issue, one on which a lot has been written and spoken about. Again, not much has changed.

Consider the situation from another angle. Education will be significant simply because investors will have more options to choose from in the days ahead. The pace in which products are being launched and the variety of schemes that will soon be on offer may well create confusion in the minds of investors. Tomorrow, the investor will also have to deal with commodity funds and capital-guaranteed funds. Education will lead him towards better and more effective decisions.

At the end, let us quickly refer to a few crucial issues that investors must be aware of. First, all MF investors, except individuals with an investment of less than Rs 1 lakh, should obtain a UIN (unique identification number) after going through the process of MAPIN.

Incidentally, Rs 1 lakh is no more a big deal. Second, production of copies of PAN card has been made mandatory for transactions.

Those who are required to obtain UIN may contact NSDL, the depository, or the points of service mandated by it. You might call the whole thing a bit annoying, but these measures are seen as an important step towards curbing malpractices. One only hopes that the regulatory agencies achieve their objective.

Feedback may be sent to nilanjan@thehindu.co.in

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