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Allowing celebrity endorsements gets mutual funds' nod

By Chandan Kishore Kant
January 18, 2017 13:19 IST
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Industry body Amfi to hold meeting to decide on road map.

IMAGE: Celebrity endorsements may work for luxury goods and FMCG but will it work for mutual funds? Bollywood star Katrina Kaif seen here with Jaguar. 

Mutual funds have welcomed the regulator’s decision to allow celebrity endorsements.

The Association of Mutual Funds in India is planning to come up with a road map soon. Just like other financial products, such as banking, insurance, and home loans, mutual funds will be able to rope in big stars to create awareness and increase reach of their offerings.

Celebrity endorsement was a long-standing demand of Amfi, a move that faced resistance due to fears of mis-selling. 

However, with strict rules in place to prevent mis-selling, industry players say the latest move will help improve their reach, which currently extends to less than two per cent of the country's population. 

A mutual fund cannot rope in a celeb, but the industry as a whole can. Therefore, the industry body Amfi will handle celeb endorsements.

Insiders say Amfi could tap into investor protection and education fund, which every mutual fund sets aside, for such endorsements. 

"There have been several instances where the funds meant for investors' education have remained partially unused. These can be well used for industry-level endorsement. At Amfi, this has not been addressed after regulator's meeting last weekend. But soon, we would meet to have a road map," said an industry chief executive officer who did not wish to be named.

Hemant Rustagi, CEO, Wiseinvest Advisors, says, "Endorsement through well-known and influential celebrities is an effective way to connect with people much faster. Reaching out to investors is a challenge. Such endorsements will help generate interest in mutual funds."

However, don't expect mutual funds to turn into a pull product from a push one overnight, say experts.

Manoj Nagpal, CEO, Outlook Asia Capital, says, "With celebrity endorsements, engagement between asset management companies and investors is likely to increase. Whether this increases sales or not, is a different matter, but mutual fund as a brand would certainly rise. Thrust should be on how to make mutual funds popular."

Increasing popularity and creating awareness of mutual funds has become important, given the changes to the commission structure.

Earlier, A Balasubramanian, CEO, Birla Sun Life Asset Management, had said mutual funds deserved a bigger endorsement and celebrities did have a better connect, which could help the sector. "The industry has the potential to become much larger than even the banking sector, and this move will give a further boost to expansion and awareness about mutual funds."

Sundeep Sikka, CEO, Reliance Mutual Fund, says, "Given the poor penetration of a mere two per cent, mutual funds needed an additional push to reach investors. This move will help propel the sector's growth."

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Chandan Kishore Kant
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