The key challenge for our industry is to expand our wallet share of financial savings by households

BFSI Industry Interview
On: Aug 12, 2015 | From: Advisorkhoj Team
BFSI Industry Interview in Advisorkhoj - The key challenge for our industry is to expand our wallet share of financial savings by households

Sunil Subramaniam, aged 54, joined Sundaram Mutual in September 2005. In his tenure spanning over nine and half years, he has handled various roles – Vice President (Retail Distribution). Executive Director (Sales and Marketing), Director (Sales and Global Operations) and most recently Deputy CEO.

He is also on the Board of Sundaram Asset Management Singapore Pte. Ltd. During the time he has been with Sundaram Mutual, the AUM of Sundaram Mutual has seen many fold growth.

Sunil Subramaniam has completed his Master in Business Administration from The Open University Business School, London and is an MSc graduate from IIT, Madras. He is also a Certified Associate of the Indian Institute of Bankers.

He has 31 years of work experience in the financial services sector across MNC, Public sector and Private sector companies. The companies he has worked with include State Bank of India, American Express Bank and Bank of America.

Advisorkhoj congratulates you on your appointment as the CEO of Sundaram Asset Management. Sundaram AMC has a great understanding of the retail side of the AMC distribution business. Your distribution network through IFAs has been very good so far. But after introduction of ‘DIRECT’ route, do you think the IFA channel for you; will remain as strong as they used to be once? Or are you also focusing like few of the other AMCs, on other channels like large platforms, corporate distributors or institutions?

SMF has always been an IFA driven channel and the introduction of Direct NAV has not reduced the importance of the channel in any manner. Even today almost 40% of our equity AUM is contributed by the IFA channel. Almost 8000 IFAs receive brokerage from us every month. Channels like Corporate distributors etc. deal with us largely in the area of money market funds and other debt products.

Penetration of Mutual funds beyond top cities in India has not been very significant despite Industry being there for last 20 years! What is your take on this? Being a veteran of this industry what are your thoughts on expanding the market?

The story is very different for SMF. The B15 market has been fairly strong for us for many years. More than a fifth of our retail folios come from the B15 markets. We have always treated the SIP route as a key driver of our efforts to expand in this market. I am happy to state that almost 40% of our SIP volumes come from B15 and almost 30% by value. Hence, this is a key thrust of our retail game plan. Last year we doubled our geographic market presence in the country – most of which are in the B15 locations. To us, the best and correct way to expand in this market is through regular contact with the distribution fraternity by our sales force and hence we seek to keep expanding the number of empanelled IFAs. Today about 37% of our IFA base comes from B15 locations.

The recent regulation on Distributor Commission and the conflict between a ‘Financial Advisor’ and ‘Distributor’ is taking the industry to a direction which many feel is not good for the growth of the industry. What is the view of Sundaram AMC on this?

In our view, the regulator is trying to get more and more distributors into an advisory model whereby the ultimate customer will be paying for the advisory services. The willingness of customers to pay for advice is yet in untested waters (from anecdotal feedback even the very rich customers hesitate to pay adequately for advice and we have heard of instances where the investors have taken advice but gone ahead and invested as per the advice given through the direct option). Hence in the short to medium term we still expect the growth of the industry especially in terms of acquiring new customers to be driven mainly by the ‘distributor’ model.

You must have adopted some districts as per AMFI program. What are you plans for ‘empowering’ and ‘financially educating’ the advisors in these districts?

Yes, we have adopted 10 districts under this program and we are in the process of opening offices here and undertaking a mass contact program to spread the awareness of mutual funds as well as empanelling new distributors.

How you are promoting ‘Investment Awareness Programs’ in B15 cities of India?

We strictly and rigorously adhere to the SEBI and AMFI guidelines in this regards and implement them assiduously though regular conduct of investor education meets. We have also planned to use various media activities such as advertisements to promote investor awareness as well as the need to ‘buy right’ according to their needs.

Sundaram AMC has a very strong track record of performance across its Midcap and MICRO Cap fund Series. After the great run up of equity markets in last 12 – 18 months, do you think there are still enough opportunities in this space?

Yes, we do think that for a long term investor there are still enough opportunities in this space. While the run up in the past 12 to 18 months has been driven largely by a valuation catch up story, the next 36 to 60 months will see valuations rise from the superior Growth in Earnings from this sector as economic activity in the country picks up.

Sundaram Midcap has been a phenomenal wealth creator - multiplied investor’s money over 33 times in 12 years. What is next for this fund?

The fund has grown to almost 3500 crores with over 2.5 lakh investors and is among the top few in terms of SIP returns to long term investors. Further, the fund has also delivered 38 per unit (380%) to investors as cumulative dividend in its lifetime. The fund has achieved this through a diversified approach with a long term buy and hold perspective (the top 10 stocks have an average holding period in excess of 3 years) and continues to remain one of the few pure play midcap funds in the market. This approach will basically remain the same in the future and hence long term investors can expect to get appropriate rewards in terms of growth and dividends especially as the Indian economy goes through the revival process.

Value Investing could be an excellent opportunity for Indian Mutual Fund Investors and you have done couple of series of that fund. Do you still suggest investors to go with this theme? Are you planning any further series on this?

Yes, we believe that from a 4 to 5 year perspective there is a very good opportunity to pick stocks based on this approach. We have recently received SEBI approval for the next fund in this series and we will be shortly launching the same.

What would be Sundaram Asset Management roadmap for next 5 Years under your able leadership?

The company has been in existence for 19 years and has always had a clear roadmap based on a sound value system, which it inherited from the founder of the 100 year old TVS Group – Mr T V Sundaram Iyengar through its 60 year strong parentage from the Sundaram Finance group. The essence of this value system is expressed in a commitment to sound business practices, commitment to deliver value and quality customer service to retail customers. None of this is going to change in my tenure and our approach will be to continue to remain a significant player in the industry by growing our retail customer base through a growing fraternity of retail distributors while increasing profitability adequately to deliver rising shareholder returns. My key focus areas will be to i) increase the visibility of our company and its products ii) expand and strengthen our presence within and bonding with the distribution fraternity iii) continue to add new products, asset classes and geographies (within India and outside) to our stable, so as to offer a more comprehensive solution package to an expanding customer base.

Anything else would you like to add Mr. Subramaniam?

The key challenge for our industry is to expand our wallet share of financial savings by households – which remains at a single digit level after so many years. The solution to the same lies in a combination of i) making our products more simple and easily understandable to new households and ii) expanding the distribution base which is critical both to acquire and service new households. For this, the distribution business must be made to be an attractive career option for a much larger set of people. On our part, we will attempt to achieve traction on both these fronts.