IDBI Federal Life Insurance Co. Ltd recently announced former cricketer Sachin Tendulkar as its brand ambassador to increase brand awareness in untapped markets. While celebrity endorsements are common to the insurance industry, you wouldn’t see them in mutual fund ad campaigns. That’s because asset management companies are not allowed to do so.
The advertising guidelines for mutual funds are more comprehensive when compared to other financial products. Apart from transparency on performance-related information of an MF product, there are special rules on promotion and endorsements.
The Securities and Exchange Board of India (Sebi), in its circular dated 15 March 2017, allowed celebrity announcements for the first time, but only at the industry level for the purpose of increasing awareness about MFs as a financial product. However, this came with a set of terms and conditions. Sebi said celebrities should not promote any particular scheme or product.
“The genesis of this guideline comes from the fact that MF schemes are market-linked products. There cannot be a visual representation or any guarantee about their performance or delivery," said Ajit Narasimhan, chief marketing officer, Sundaram Mutual.
Sebi also laid rules on the expenditure towards industry-level endorsements and advertisements. “Expenses towards such celebrity endorsements for increasing awareness of mutual funds shall be limited to the amounts that are aggregated by mutual funds at industry level for the purpose of conducting investor education and awareness initiatives," stated the circular.
Industry lobbies such as the Association of Mutual Funds of India (Amfi) are allowed to use celebrity endorsements but with prior approval from Sebi. Amfi recently conducted a campaign titled, Mutual Funds Sahi Hai, but did not feature any celebrity despite getting Sebi’s nod.
Though the discussion did arise in a couple of financial advisory committee meetings, there has been no decision yet on who would fit the bill. “Whenever celebrities are involved, there are a whole new set of issues because a liked celebrity today may end up in some controversy tomorrow. So it’s an important decision which requires some time," said an Amfi member.
Narasimhan said MFs have seen a dramatic increase in the number of investors and products, mainly because of Amfi’s awareness campaign. There have been no celebrities talking about it even at the industry level, yet the numbers have increased in the last three years. The Indian MF industry grew to ₹ 23.96 trillion in July this year, up 17.33% from the previous year, said a recent Amfi report.
There are multiple factors that determine the performance of funds and the returns could vary depending on market forces. However, insurance companies fundamentally have a value proposition in the form of a cover which offers some assurance which is not the case with MFs. “In this day and age of digital media, celebs who lead by example, are fit, healthy and aware of importance of health insurance, can be utilised to spread awareness among digital natives, who research online before making any purchase," said Anika Agarwal, senior vice-president and head-marketing, digital and direct sales, Max Bupa Health Insurance Co. Ltd.
In July this year, PaisaBazaar, an online marketplace for loans and credit cards, landed in trouble for featuring Bollywood actor Akshay Kumar in its MF ad campaign.