A Study of Information Needs of Mutual Funds Investors & Implications for Web Based Marketing of Mutual Fund Products
39 Pages Posted: 7 Nov 2010
Date Written: November 4, 2010
Mutual funds are one of the most important financial service vehicles for investments. Over the past 46 years, the Indian mutual fund industry had witnessed impressive growth in Assets Under Management (AUM), investor base and product offerings. The industry registered Compounded Annual Growth Rates (CAGR) of 26% since its beginning and 32% over the last six years.
Currently, 37 Asset Management Companies (AMCs) comprise the industry and collectively they manage assets Rs 7945 billion (approximately US Dollars 172 billion). As at the end of December 2009, the total number of mutual fund schemes available for investment was 819. The mutual fund industry in India presents an interesting scenario of 48 million investors, a large variety of product offerings and coexistence of private, public and foreign AMCs.
In India, the Asset Management Companies market their investment products largely through AMFI Certified Agents, Service Centres and company’s web portals. There is little promotion in print media and in the recent times AMCs have begun outdoor advertising through large size Bill Boards/Hoardings.
Investors require certain types of information for making conscientious and informed decisions for their financial security. Not many studies have been conducted about the extent to which the information provided in the advertisements/web portals facilitates informed decision making.
The study aims at identifying the information needs of retail investors for making informed decisions with regard to investment in mutual fund products and its implications for online marketing of mutual fund products in India. The study had the following four objectives: (a) To identify the information needs of retail investors of mutual fund products for informed decision making. (b) To examine the extent to which the information made available on the web portals meets the information needs of the retail investors as per (a) above. (c) To examine the nature and extent to which the information available on the web portals complies with the requirements of the Securities Exchange Board of India (SEBI), the regulator of Mutual Funds in India. (d) To analyse the implications of the information needs for marketing of mutual fund products by Asset Management Companies in India.
The study identified 19 information needs and ranked them to clearly identify Top 10 information needs. Further, the study brought out that the websites of Top 3 Asset Management Companies are quite comprehensive and provides the information on 19 information needs identified by the survey. Further, the content of these websites are also SEBI compliant.
A comprehensive literature review was conducted which helped in identifying the information needs of retail investors of mutual funds. The research study of Investment Company Institute, USA was particularly helpful in designing the research instrument. The research instrument was administered to 385 retail investors in Delhi and NCR region with the help of India Bulls, Gurgaon and other Mutual Fund investment advisory companies. 372 respondents had fully answered the questionnaire which had two parts: Part A: Personal Data; Part B: 19 Questions to identify the information needs of retail investors of mutual funds. The respondents were required to respond on a scale of 5 (Likert 5-point scale).
The respondents were of near consensus with regard to their information needs which are evident from low standard deviations and coefficients of variation. The information needs were ranked on the basis of average score for each of the information need and the following information needs emerged as vital (Important to Most Important) for investment decision making.
The first objective was achieved with the identification of information needs and the second objective was achieved by verifying the information content available at the websites of Top 3 Asset Management Companies in India. It was found that information regarding all the 19 information needs was available. Infact, the information placed at the websites is quite comprehensive and if the information is meticulously studied and researched should enable the knowledgeable investors take informed and sound investment decisions.
The third objective of ascertaining the extent to which the information content made available at the websites of the Top 3 AMCs complies with the regulatory requirements of SEBI has been achieved by analysing the Guidelines of SEBI to AMCs. The relevant Guidelines of SEBI has been put under 9 broad headings and they have been verified for compliance by the Top 3 AMCs. It was found that the chosen three AMCs have fully complied with SEBI Regulations aimed at transparency, awareness and investor protection.
The information displayed at the websites is comprehensive but there is no standard format in which the information is provided. An average investor would not have skills and time collate and compare the required information among different funds. Further, it has been from the survey that 89% of the respondents use websites of the AMCs for the required information.
Since the study was conducted in Delhi and NCR, the findings may not be representative on Pan India basis which has over 48 million retail investors. Hence, the findings have to be taken with caution.
Keywords: Information needs, Mutual Funds, Mutual Fund Products, Asset Management Companies, Web based Marketing, Regulatory Compliance
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