If you cannot explain to a seven year old, you have not understood it well enough and this inspired me to launch...

BFSI Industry Interview
On: Jan 3, 2014 | From: Dharmendra Satapathy
BFSI Industry Interview in Advisorkhoj - If you cannot explain to a seven year old, you have not understood it well enough and this inspired me to launch...

Dharmendra just turned an entrepreneur. Prior to this he was Head-Marketing at Tata Asset Management. He is a Mechanical Engineer from University of Pune & MBA in Marketing from Symbiosis Pune. After spending the first 14 years of his career in advertising with Lintas, O&M and FCB he entered world of finance 7 yrs ago. To help common man understands financial jargons he created Professor Simply Simple which has more than 100,000 downloads from across the world. In a candid interview he shared his thoughts with founder of Advisorkhoj, Pradip Chakrabarty.

First, let me congratulate you for turning Entrepreneur. What were the thoughts behind it and what are your future plans?

It is important to understand that life is a journey and we need to play different roles in this journey. I was clear in my mind that I needed to apply my experience to create a business asset that can help me through this journey. One of the life's lessons is about dealing with the 30-30 challenge - 30 productive years to support 30 retirement years. I am no exception and also need to face this challenge. These were my thoughts before I chose to step into the shoes of an entrepreneur.

As you know the penetration of Mutual funds beyond few top cities has not been significant despite Industry being there for last 20 years? What are the possible reasons in your opinion?

The key reasons to my mind are

  1. Focusing on AUM instead of the number of investors

  2. Focusing on quick gains instead of life time value of a customer

  3. Setting incorrect expectations for clients.

  4. Focusing on the middle aged customer instead of looking at the youth - the future customer. Let's not forget a very large proportion of our population are the youth.

How important is the "Investor Education" in this context?

Investor Education is the primary marketing tool needed to grow the market. However it is not a quick fix. Its an investment for the future. I would go one step further to describe investor education as Financial stories for investors or even Financial entertainment for investors. Just talking and doing financial education alone will fall short unless we focus on the education design.

The solution lies in the "How" of education rather than in the "What" of education. The investor as such thinks of finance as "not for me" subject. We need to change that by the use of innovative content such as stories, poems etc.

Is MF Industry doing all the right things in taking Financial Advice to the masses through IAP (Investment Awareness Programme?)

It is too early to make a judgement because not much time has elapsed since the introduction of the SEBI mandate. Some AMCs are running innovative programs like we did at Tata Mutual Fund by way of the Simply Finance Quiz.

However what is vital for the industry to realize is that there isn't any short cut to education. Although innovative programs are needed to create awareness, pure grass root level education is the need of the hour. However one must also understand that grass-root education too can be made innovative and engaging.

What innovation MF industry should bring in taking IAP to the masses?

Content will play the biggest role for reaching education to the masses. Stories, analogies, poems, plays (drama), animation, films, games are the formats that engage people. We will have reach grass root level education to the people using these formats.

How important is the role of a Distributor in taking Mutual Funds to the masses?

The role of the distributor continues to be vital. Financial products are complicated. Hand holding of the investors is needed to explain the story of financial planning and the suitability of financial products. However distributors need to avoid sharp practices such as mis–selling for short term gains. They need to follow the tenets of financial planning earnestly with full sincerity. They need to focus on the life time value of the customers rather than their up-front earnings. They need to manage investor expectations well. What is most important however is to look at the advisory business based on RIGHT INTENT.

Is promoting Mutual Funds really a good career option for Distributors post reduction in Commission rates and growing compliance?

There is no reason to believe that the mutual fund advisory business is not suitable for Distributors. In fact if one has to grow the number of investors and the industry the distributors will have to play a very crucial role. However one also needs to understand that the way of doing business will have to change. Business has to be investor-centric based on right intent and long term perspective. Those who still believe that short term orientation, high up front earnings and churning would be order of the day will be disappointed though.

What really is missing from AMC side in terms of educating the Distributors and empowering them?

We have been doing business for far too long on the basis of pricing negotiations. What is missing is a clear investor-centric, long term oriented business structure.

How effective are the CFPs? Is FPSB doing enough for promoting Financial Planning through these professional?

I don't think I am best suited to answer this question. However to the best of my knowledge and through the association I have had with FPSB, I have reasons to believe they are doing their bit. Once other stake holders start following the financial planning approach earnestly, the contribution of CFPs and FPSB would be felt better.

Do you think Direct Plans will help increase the Mutual Fund pie? Or will it simply take away a portion of the Distributor's asset?

I have extremely strong conviction that the direct plans and indirect plans have to co-exist and the distributors should welcome this rather than feel threatened. This mind set would a win-win for both the distributors and asset management business by bringing in more investors and growing the industry. By trying to protect their turf by way of possessing their customers, distributors themselves are curbing industry growth.

In your opinion what would be the three most important things that the MF industry should do in order to change the MF landscape in this country?

  1. Focus on investor and distributor education by way of engaging content

  2. Look to strategies beyond pricing while drawing up the marketing plans.

  3. Sell fewer and simpler products (solutions) that are clear to both distributors and investors. Hence a lot of pruning (merger) of products is still needed

Your content and Articles (both Prof. Simply Simple and Intellect) has been really a great success and I personally admire that. How the idea germinated and how TATA AMC is going to take it forward in your absence?

The ideas (Prof. Simply Simple and Intellect) were a spontaneous expression emerging out of a layman's need of making things simple and easy. When I joined Tata Mutual Fund my knowledge of finance was close to that of a lay person. Hence, I instantly knew what I need to write for an ordinary non finance person to understand. I had also heard of the famous quote of Albert Einstein, "if you cannot explain to a seven year old, you have not understood it well enough" and this inspired me to launch Professor Simply Simple and later Intellect.Going forward the team at Tata Mutual who have been associated with me for nearly 8 years is capable of managing these properties. Secondly, I am also considering engaging with Tata Mutual Fund, albeit in the capacity of a consultant going forward.