On the first day of new Ulip guidelines for insurers, a mutual fund house announces, ?No exit loads on our equity funds.? Its investors could now walk in and out of the fund at will. The new Ulip rules, in contrast, have freshly mandated a 5-year lock-in for investments along with reduced charges. It?s no coincidence and only highlights the positioning the two competing saving products have taken in the minds of the prospective investors. The revamped Ulip?with 5-year lock-in and reduced annual charges?is the new Robin Hood out to save investors from getting cheated and mis-sold. Irda?s advertising campaign to call its toll-free number, if investors have complaints, complements its positioning strategy.
Also after the new guideline, the revamped Ulip product is the new saving product for the ?long-term? investors. Talk to an insurance agent, and he would say, ?if investment horizon is five years or more, choose Ulips or else mutual funds.?
Mutual funds, in contrast, have done nothing to differentiate their products. Their marketing managers usually launch four to five NFOs a year in good times, collect the money and sit tight. The biggest folly of mutual funds is that they want to be everything to everybody. They launch different types of schemes for all classes of investors and end up making the investor confused. Ulips, in contrast, usually have two to three portfolio options, making it simpler to understand. Simple products are easily sold.
Annual charges for Ulip policies (more than 10 years) are much lower than those for equity mutual funds. This definitely makes it a compelling long-term saving product. It is likely Ulip will now get even more popularity because now the ?bug? of higher front-loading charges has been removed. On the distribution side, it is still lucrative to sell a Ulip as compared to an equity fund. Entry load ban is still a big deterrent to selling mutual fund products.
Interestingly, some of equity mutual funds have long track record of performance, yet haven?t seen inflows in recent times. Perhaps, it?s the mutual fund?s mistake that they haven?t highlighted it. Constrained by marketing budgets, often they are meek. Insurers, in contrast, have been heavy advertisers. Often their advertising campaigns build emotional connect. In the marketing world, where mindspace and positioning matter, certainly insurers have got it right.
muthukumar.k@expressindia.com