Mutual Funds

Commercial Bank Management

Section A
Group 5

Prem | Priyanshu | Ram |

Rohan | Shivanand |
Toshu | Vishwath
4 C’s of Mutual Funds
 4 C’s of Mutual Funds
Customer
- Giving the investors a chance to manage their finances
responsibly.
- An entry into financial markets and financial inclusion.
- Better option to park their money in an easily
accessible manner with growth.
Communication
- AMFI site hosts a big amount of comparison data and
tutorials to help even a novice.
- Fund houses regularly send out monthly and annual
statements keeping in touch with their investors.
- Digital marketing and television advertisements
making these products more accessible to the people.
Cost
- Mutual fund houses have very low management and
transaction fees (< 2% of the total AUM).
- Customer acquisition costs are negligible as the focus
is more on changing the mindset.
- There are no holding charges nor starter charges.
Convenience
- Mutual funds are available on the digital market and
can be bought with a few clicks.
- Aadhar and KYC norms have made the documentation
and paperwork a lot less.
- Governed a lot less strictly. Promoted by the
Government.
 7Ps of Mutual Funds

Product: Price:

● Pools resources of multiple investors ● Low prices to attract customers

● Large number of variants available ● Distribution fee separates competitors
● Differentiation and Branding is important

Place: Promotion:

● Direct channel: Sale of product between ● Aggressive promotional techniques are

service provider and customer employed since competition is high
● Indirect channel: Sale of product involves ● Regular ads in national dailies, business
intermediaries newspapers, magazines and TV
 7Ps of Mutual Funds

People: Process:

● For investors, frontline staff represent the ● Revision of schemes should be avoided as it
company increases costs
● High level of interpersonal skills ● Mutual Fund houses try to standardise the
● Customer oriented attitude process

Physical Evidence:

● Offer documents
● Mutual Fund statements
Customer Value Creation
Value from the customer’s point of view is driven by 4 factors namely Product, Access, Experience
and Cost, which can be further classified into several factors as mentioned.

Source:Plaster, G. A. and J. D. Alderman (2006). Beyond Six Sigma: Profitable Growth Through Customer Value Creation
Customer Value Creation
Product Drivers
● Offering easy access
● Different mutual fund
offerings such as
growth
funds,dividend funds,
debt funds, gift
funds, fixed maturity
etc. for different risk
appetites and
long-term or short ● Building customer
term goals.
● Usage of emerging
technologies such as
AI and ML for Quant
funds and similar
offerings.
Access Drivers Experience Drivers
● Increasing use of
mobile applications to
to invest and guiding
customize user
the customer to take
portfolios according to
informed decisions as
their own risk profiles
per their convenience ● Increase focus on
i.e. walk-in or online offering asset allocation
access through web advice before offering
portals, mobile apps. actual assets to invest
in, resulting in greater
awareness about the interaction between
reliability of mutual firm and customer
● Improve brand
funds as investment
perception via constant
vehicles.
interaction with
customer on various
platforms with a variety
of content
Cost Drivers
● Fund houses must
find a way to
minimise costs
incurred by customer
to improve value
● Unbundle charges to
just fund
management costs
and advisory costs
● Increase payment
options where cost
incurred to customer
is based on
performance of the
fund
 Business Development Issues
Low Financial Literacy/ Awareness:

● Low awareness of financial literacy can be one of the challenges of the mutual fund industry. Even if people can
invest, they rather go for other types of savings rather than putting their money in mutual funds for the next few
years. They were not aware that mutual fund units also have dividend options.

● Investors willing to take up the growth option can easily go for it. But no one wishes to have inorganic growth. There
can be various reasons behind it. One of the major reasons is the awareness about the mutual fund. Most of the
people have the opinion that investing in mutual funds means putting money in high risk. These types of customer
experience create an impact of lower financial literacy.

● The industry is countering with AMFI (Association of Mutual Funds in India) promoting ad campaigns like mutual
funds sahi hai

Availability of other attractive investment opportunities:

● The availability of other attractive schemes like PPFs, FDs, Gold etc. which common people can understand easily
had a substitute effect.

● The monetary policy of the government was not appropriate to support the industry. There were inorganic growth
opportunities in the economy which was not matching with the total expense ratio.
 Business Development Issues
● Shifting from awareness to education:

The industry spends two basis points or about Rs.500 crore per annum on investors’ education. 50 percent of
which was via AMFI’s pretty successful Mutual Funds Sahi Hai campaign. However, need of the hour is to
transform mutual funds from a push to a pull product.

● Need for more distributors:

There is a need for far more distributors and advisors to spread the message of investing in mutual funds far
and wide. Indians are usually risk averse and lacks sound financial literacy, thus refrain from investing in
market-linked products owing to a lack of understanding.

● Highly regulated industry:

Mutual fund investments are subject to market risks, read the offer document carefully before
investing
 Business Development Issues

● Need for simplified operational processes

While the mutual fund industry has made significant strides in standardising processes, but few
challenges still remain: such as a simplified KYC to make onboarding hassle-free
● Performance related problem:

The challenge which is faced by the entire mutual fund industry is the performance. Most of the
investors are concerned about the safety of the principal sum that they have invested. Thus, there was
increased participation in the bond market. The expectations that they have with the amount are Long
term growth opportunities, Regular return and Tax benefits

Even a decently performing mutual fund returns give lesser returns due to the huge exit load fee,
redemption fees and annual operating expenses.
Thank You!