Reputation Study:
Mutual Fund Industry
Reputation Study:
Mutual Fund Industry
Introduction
The mutual fund industry has emerged as a critical driver of India’s economic growth by channeling household savings into productive investments. With rising incomes, investors have turned to mutual funds as a reliable alternative between high-risk stock trading and low-return bank deposits. The industry has witnessed an impressive five-fold growth over the past decade, with assets managed by the MF industry reaching Rs 40.8 lakh crore in January 2023, a growth of 4.93 percent from the previous year.
This growth can be attributed to various factors, such as the popularity of Systematic Investment Plans (SIPs) among retail investors, as well as fund houses’ successful adaptation to changing financial and geopolitical circumstances by launching innovative equity, debt, and hybrid funds that cater to evolving investor needs. Additionally, the mutual fund industry has played a pivotal role in providing financial literacy and optimized portfolio management for institutional investors. Despite the industry’s success, there are challenges that need to be addressed, such as evaluating the achievements of organisations within the industry. Non-financial metrics like reputation can provide better insights into this. Corporate reputation is a crucial measure that affects stakeholders’ trust, and decisions, and ultimately leads to brand association and loyalty. In today’s highly dynamic digital world, corporate reputation is vital for the mutual fund industry’s continued success.
Eminence, a strategy consulting firm focused on reputation, conducted a comprehensive study on the Indian mutual fund industry, using its proprietary Reputation Score© methodology. The results show that the industry’s reputation score was 25.3, indicating a moderate performance. The score highlights the need for significant improvement in areas such as customer service and regulatory compliance. While the industry excelled in promoting its funds and generating financial awareness, the negative reports of financial irregularities and allegations of insider trading severely impacted investor confidence, thus creating a trust deficit.
Customers raised concerns about the lack of transparency in the industry’s functioning and questioned its regulatory framework, contributing to the low score. Additionally, employee grievances, such as long working hours and low compensation, further added to the industry’s challenges. However, despite these obstacles, the Association of Mutual Funds in India (AMFI) and the fund houses, have played a crucial role in attracting investors through its successful “Mutual Funds Sahi Hai” campaign, resulting in millions of new investors every passing year.
Going forward, the industry must focus on a favourable turnaround by highlighting the efforts taken by fund houses to rebuild customer confidence and create a conducive and lucrative work environment. The industry’s continued endeavor to offer attractive investment options to its investors and make mutual funds a trustworthy instrument for the dynamic and market-savvy Indian investor, need to be promoted more aggressively.
We hope you find this report informative, and we welcome your feedback.
Eminence Reputation Score: A comprehensive model capturing multiple reputation dynamics
Mutual Fund Industry Coverage
Based on AUM
January – December, 2022
Data Sources
Social Media Conversations I Employee Reviews I Customer Reviews I Media Coverage
Scoring Scale
POOR
(<0-20)
Moderate
(21-40)
Average
(41-60)
Good
(61-80)
Excellent
(81-100)
Our analysis shows that the overall reputation score of the mutual fund industry from
January to December 2022 is 25.3, representing a moderate score with significant upside potential
Each driver has a defined weightage as per the Eminence Reputation score model
The Reputation Score is based on following drivers
Reputation drivers arranged in descending order of the weightage assigned to each
No Data Found
-29.4
Customer Experience
No Data Found
20.3
Responsible Business Practices
No Data Found
97.2
Brand Exposure
No Data Found
49.0
Workplace Character
Click on each driver graph for insights
Attributes driving the Positive Reputation Score
Significant role in the overall economy & market, and thought leadership
Attributes driving the Negative Reputation Score
Customer grievances, employee observations and front running allegations
Customer Experience
Irregularities in the mutual fund industry peaked the anxiety of the customers, which reflects in the numerous reviews and
feedback on Twitter and other customer complaint forums
Investors benefited from various Equity schemes launched in 2022. Experts also recommended funds to customers based on their financial needs. This led to positive customer feedback for the industry. Retail investors also commended the performance of some of the mutual funds, becoming the brand advocates for the fund houses.
Customer grievances about the lack of transparency w.r.t. the allegations of fraudulent transactions resulted in negative reviews for the funds. Customer dissatisfaction further peaked with the front-running allegations against employees of the top fund houses in the country.
The discrepancies in digital payment methods, such as incorrect amounts debited from the account, lack of clarity from the customer service executives, etc., added to the fund houses' negative perception.
In a report released by AMFI, majority of complaints pertained to incorrect information about the funds, and issues such as non-receipt of transaction SMS/email/OTP, SIP registration status etc.
Score
Most Prominent Topics
-29.4
(POOR)
No Data Found
Responsible Business Practices
Irregularities and front running allegations on leading fund managers in the country negatively impacted
the imagery of the Mutual Fund industry in 2022
Most fund houses have been championing the cause of spreading financial literacy across masses through scholarships, tie-ups with education institutes, and special education programs. The fund houses also communicated their intention to achieve environmental goals by being a part of green initiatives like Net Zero by 2070 at CoP26, plantation of saplings, and many more. Additionally, SEBI’s communication inviting suggestions to regulate ESG Rating Providers (ERPs) was welcomed given the increased awareness of investors to consider ESG practices of companies before making investment decisions.
Front-running & price rigging allegations put a dent in the mutual fund sector’s imagery during 2022. Some large fund houses and fund managers were involved in highly publicized allegations about their dealings, that put serious questions on the functioning of these fund houses and the trust instilled in them by the institutional and retail investors. SEBI has been quick to revisit its regulations and tighten the rules that govern the mutual fund industry. It has sought the government’s clearance under the IT Act, 2000 to intercept and decrypt digital communications, of brokers and fund managers to ensure such incidents are avoided in the future. The Mutual Fund industry will need to prepare itself for more stringent guidelines and stricter norms.
Score
Most Prominent Topics
20.3
(Poor)
No Data Found
Brand Exposure
CEOs & Fund Managers were regularly quoted on various developments and their impact on the Indian financial markets. Innovative products aligned with the changing financial needs of the investors were the focal point for the
Mutual Fund industry in 2022
The CXOs and fund managers regularly shared their views on the Indian equity markets, monetary and fiscal policies, global geo-political developments, and more. This contributed to the thought leadership positioning of the industry as a whole. Additionally, the CXOs of fund houses have been at the forefront of creating financial awareness and have become the torchbearers of promoting the culture of informed investing across all strata of investors, thereby creating a positive disposition towards the industry. Leadership team movements across fund houses made headlines during the period. The industry has been launching innovative and relevant new products. A record 149 mutual fund schemes were launched in 2022, with more focus on Passive funds (as per data from Morningstar). Funds such as India’s first silver ETFs, India’s first SIP-focused NFO, Metaverse ETF, and funds based on Target, Housing, Transportation, and Logistics, were launched keeping the changing financial aspirations of the investors. The launch of women-led financial empowerment initiatives was well covered by the media. The Mutual Fund industry focused on improving digital infrastructure for its customers and introduced multilingual websites, partnered with NSE to launch India’s first Invest-verse, 24/7 platforms to transact.
News of SEBI levying penalties on board members and leaders of some of the largest mutual fund companies sparked criticism and created discomfort among investors.
Score
Most Prominent Topics
97.2
(Excellent)
No Data Found
Workplace Character
While the work-life balance is appreciated by most, there is equally strong negative feedback on the compensation and
value system of the fund houses.
Employees appreciated the efforts of fund houses to increase diversity and inclusion, along with their focus on work-life balance. Most fund houses were complimented for the work culture and growth opportunities that they provide to the employees. The skill development programs and work exposure to the new recruits were also some of the positives that were highlighted across fund houses.
Most of the negative perceptions were driven by employees’ feedback on HR policies regarding promotion and increments for off-role employees. Favoritism and difficult managers were highly criticized by employees. The decision by AMFI to remove work from home policy was resisted by the workforce, resulting in criticism by them.
Score
Most Prominent Topics
49
(Average)
No Data Found
Potential Reputation Risks
For a highly regulated and sensitive industry such as Mutual Funds, the front-running allegations on some of the leading fund houses shook investor confidence. The scale of the irregularities not only affected the retail investors but also corporates and SMEs, putting a question mark on every deal made by fund houses.
Regular communication and engagement with investors and all stakeholders at large, conveying in detail about the risk management practices and investment processes is critical.
Despite the mutual fund industry’s significant strides in digitizing investment processes and streamlining transaction experiences, systemic errors such as technical glitches, transaction errors, server downtimes, and data inaccuracies have resulted in inconveniences to investors and compromised the accuracy of account statements. This not only undermines customer trust but also poses a risk to the industry’s reputation as a whole.
Mutual fund houses must make significant investments in bolstering their technology and enhancing the user experience if they are to effectively address these issues. They should also concentrate on educating consumers, teaching distributors and agents about ethical marketing techniques, and raising investor digital literacy. The industry can build a strong foundation of trust and transparency by arming investors with the knowledge and skills they need to navigate the digital environment.
While employee portals have input on employee experiences but there has been very limited discussion by the fund houses about work culture, employee benefits, and meritocracy. Given the increasing popularity of mutual funds, the pressure on the workforce is equally high. Additionally, the challenge to attract and retain quality talent is also a reality here like any other industry.
Hence, dedicated employee engagement initiatives are a must for the industry. This has to be well supported with a robust communication plan for attracting potential talent and creating differentiation for retaining existing talent.
Recommendations
Banks are launching new products, while customers are still grappling with the existing products. Closing the service gap is essential for a smoother customer experience. Customers are putting their grievances on public platforms, that reflect a disparity in the flawless user experience committed by the banks. A focus on educating customers on better usage of digital platforms can mitigate the concerns.
The buzz around sustainable practices has increased, and the narrative is mainly steered by foreign banks. Private banks and more importantly, PSBs should increase their focus on ESG in order to remain relevant to the stakeholders, especially the environment conscious future customers.
Employees are the biggest brand ambassadors and turn into loyal customers when given a positive experience. While a lot has been done by the banks in terms of workplace best practices, negative reviews on public platforms reflect a high level of discontent amongst the personnel. This needs to be addressed as a priority for banks to continue being among the preferred sector by the current and potential workforce.
Concept & Methodology
Reputation is an overarching concept encompassing all the facets of a business from the little things that matter to major business decisions; however, there are no specific measurement criterion or tools available that presents a holistic picture of an organization’s reputation or provide a consolidated rating. With this background, Eminence developed the concept of “Reputation Score” as a composite score to measure an organization’s standing based on publicly available data and credible industry sources of information.
This one of its first-of-its-kind, holistic Reputation Measurement Score is based on globally accepted parameters. The dashboard offers a complete view of an organization’s reputation across its stakeholders. Since a multitude of factors influences corporate reputation, an exploratory study was conducted across CEOs and CXOs to understand the most impacting elements of reputation. Internal focus group discussions (FGD) were conducted with the objective to identify a comprehensive list of factors affecting corporate reputation. The identified reputation drivers, hence, are a result of well-researched ideas and feedback from this stakeholder group and secondary research sources.
The mutual fund companies selected for the study were based on parameters such as the type of fund houses based on AUM managed, ownership, etc.
The study takes into account:
50+
Data Variables
10,000+
Business responsible conversations across news & social media
1,000+
Customer & employee voices
The score is arrived at based on scientifically designed weights and statistical algorithms, corroborated by research experts.
Team Eminence
Extensive experience in Branding, Communications, Brand Research, and Data Analytics. Experienced professionals, having worked in business categories like Banking and Financial Services, IT, FMCG, Entertainment, Automobiles, Telecom, Manufacturing, Credit Ratings, etc. A diverse mix from the fields of Journalism, Economics, Brand Research, Media Measurement, forms a strong force of individual and collective knowledge base for our clients.
Mitu Samar, Founder & CEO of Eminence, is a seasoned reputation consultant with two decades of experience. After having worked with well-known companies across BFSI, Credit Ratings & Logistics, she founded Eminence Strategy Consulting (www.eminencestrategy.com), thus facilitating organizations and individuals in building, establishing, and protecting their reputation through stakeholder engagement. She serves as an independent director on the boards of the Times Internet Limited and Aegon Life Insurance.