Mutual Funds

How to connect with the investor

Shridhar Iyer | Updated on March 12, 2018

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Incentivising distributors who improve customer engagement is a good idea



Mutual fund penetration is low in India — the total assets managed by the industry is just 4.7 per cent of the country’s GDP, compared with 77 per cent in the US, 41.1 per cent in Europe and 33.6 per cent in the UK.

Even as the long-term returns on mutual fund investments outscore other investment options, the product is yet to find favour with small investors. Customer service remains one of the most under-examined reasons for this. Customers very rarely protest against bad service. Instead, they simply switch investments to other fund houses.

But does the industry take cognisance of the deficiencies in servicing customers? The fund houses are divided. Some claim that they are manufacturers of products and their job ends when they put the product in the market. The product’s sales and service is done by the distributors and is their responsibility.

Another set of mutual fund houses say that the level of customer servicing is already high and nothing needs to be done in this regard. They cite the low complaints to folio ratio (total complaints as a percentage of total folios) to substantiate this.

But there are some exceptions too, a few fund houses are keen on improving the quality of service. These fund houses are unfortunately dependent on their registrars to achieve this.

So, how can this be addressed? Here are three ways by which the industry can improve its service quality not just to satisfy its existing investors but also to attract new ones.

Distributor factor

First, fund houses should recognise that distributors only represent their brand to the retail investor. If the service quality fails to meet expectations, it is the fund house that suffers.

Since there is hardly any monetary incentive for distributors to improve the quality of service, it will be a good proposition to incentivise distributors who improve retail customer engagements and servicing. Likewise, consider lower commissions for distributors in case of frequent complaints against them.

As for the funds that think they have ‘satisfied’ customers, they may be deluding themselves. Dissatisfaction can arise from small problems. For example, when a first-time investor realises that her bank account has been wrongly mentioned (leading to non-receipt of dividends) or nominee details have not been updated, she will seldom be a repeat customer.

Here, the regulator (AMFI or Association of Mutual Funds in India) can consider introducing reports that use customer service metrics beyond the plain-vanilla customer complaints. A simple tool, such as a customer journey map, will throw light on the challenges that a retail customer goes through while trying to buy a mutual fund scheme. This will help fund houses identify the lacuna and work on it.

An analysis of the investor complaints listed on the AMFI website reveals the following: Of the total 51,083 complaints received by the top seven funds during 2012-13, a bulk of the complaints involved data corrections in investor details, followed by discrepancy in statement of account; non-updation of changes relating to address, PAN, bank details, nomination, etc.; non-receipt of dividend on units; and non-receipt of redemption proceeds.

In India, customers of 47 AMCs are serviced by three registrar and transfer agents (RTAs) with the top two holding a 90 per cent market share.

The nature of the complaints has not changed over the years, neither have the registrars or top rung asset managers.

RTA Muscle

Such concentration in the RTA business does not augur well for the industry.

Many a time, smaller fund houses will have no say in client servicing aspects because they have to follow the standards established by the registrars for bigger customers.

Permitting funds to appoint multiple registrars will allow them to compare and demand better accountability in terms of services. This will help fund houses escape the rut, by broad-basing the servicing capabilities and leverage all the registrars uniformly.

In addition, fund houses should insist on standardisation of documentation requirements for key servicing requests such as nomination, lien, transfer of units, etc., across the industry.

At present, processes for requirements such as adding a nominee, correction of spelling errors, notifying the death of the main investor and subsequent updating of beneficiary details, etc., vary between fund houses and are often quite confusing.

To summarise, we need an industry framework that provides enough attention to customer servicing aspects.

Together, we need to walk that ‘extra mile’.

It is our collective responsibility to track the customer, hand over her undelivered mail and her hard-earned money with the same zeal with which the fund house had collected it from her.

(The writer is CEO of Sundaram BNP Paribas Fund Services, a registrar)

Published on April 06, 2014

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