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Home / Opinion / MF industry needs to look at standardization in a new light

How do you drill something into a person’s head? Make him or her repeat the same thing 50 times like they used to make us do at school? Theatre veteran Mahabanoo Mody-Kotwal has a unique way of drilling a message into her audience’s head. In 2009, when I went for The Vagina Monologues—her internationally-acclaimed play that aims to create awareness about violence against women the world over by bringing true stories on stage by way of monologues (she brought this play to India, too)—she came on stage before the play began and made the audience repeat the word “vagina" three times, slowly and steadily. You may gasp and gulp but say you must, she said. And each time we said it, she pushed us to be louder. The idea, she explained subsequently, was to make us aware that it is not just a body part, it also symbolises “the spirit and essence of a woman. If you can’t say the word “vagina" then you can’t talk about the abuse of the vagina", she explained later in an interview with the Guardian on her India experience of staging the play.

Perhaps the chiefs of all fund houses in the 7.61 trillion Indian mutual funds (MF) industry—and also the new chief executive officer of the Association of Mutual Funds in India (Amfi) who will assume Hoshang N. Sinor’s duties later this year after the latter’s term comes to an end—should be given a similar drill: repeat “standardization" for as many times as it takes to understand how important it really is. Lack of standardization is one of the biggest reasons why Indian investors have preferred to stay away from MFs. By lack of standardization, I mean the difference in customer service standards adopted by different fund houses. Much newsprint can be devoted to illustrate several examples, but let’s look at a few.

If you wish to change the bank account from where your systematic investment plan (SIP) money gets debited from, some fund houses mandate you to cancel the ongoing SIP and start a new one. Others allow you to submit a letter with a cancelled cheque leaf of the new bank and continue in the same folio. Then, if you wish to terminate an SIP midway, some fund houses accept a request letter from you. One of the top five fund houses has a form that you got to fill asking details like when you started the SIP, your scheme’s name, option and so on. One wrong detail entered here, I am told, and your application gets rejected; your SIP continues and money keeps going out of your bank account. Then again, if you wish to renew your SIP, some fund houses mandate that the first instalment be paid by cheque and subsequent instalments through bank transfers. Others initiate bank transfers straightaway.

There’s more. Take the case of nominee registration. Some fund houses allow you to nominate more than one person. Others allow only a single person. A foreign fund house of European origin insists that you sign a declaration on the form if you don’t wish to nominate anyone; many fund houses don’t insist on a declaration. Not signing declarations in the forms of such fund houses results in your application getting rejected.

It’s one thing that fund houses feel the need to cover their tracks in case there’s trouble later. But it’s quite another when different fund houses have different policies on simple issues. Two sets of people can make a difference here: Amfi should bring together fund houses to agree on a common set of guidelines and practices to be followed. Over the years, it has been issuing “best practices" guidelines, but since Amfi is a trade body and not a regulator, fund houses are not obliged to listen. Also, the aim of the circular is the same for all firms; the paths that fund houses take to reach them differ. Sinor, on his part, streamlined Amfi’s way of working; he united the industry on several issues and formalized Amfi’s style of working, besides making it look and sound more credible. Amfi’s next big agenda should be to bring about standardization in the way fund houses deal with their investors.

All processes can never be standardized, but things such as account forms, acceptable ways of filling it (some fund houses don’t allow ink whiteners to be used on application forms; others say as long as they are not on bank account and folio number details, it’s okay), the process of making switches or redemptions, SIP renewals and so on should be made uniform.

The other key role can be played by the registrar and transfer agent (R&T). Typically, when a new fund house comes under its wing, the R&T guides the fund house about the best practices prevalent in the industry on various customer service issues. Though it’s left to the fund houses’ discretion, they must realize that too many deviations will come back to haunt them, especially if the inconvenience outweigh the benefits.

Rules and restrictions are fine, but let us not stifle the small investor, shall we? Now say “standardization" again. And this time, a little louder please?

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