Franklin Templeton has just launched its "Franklin Templeton Learning Academy" in Singapore in an attempt to catalyze long-term investment in mutual funds, and plans to spread the programme Asia-wide this summer, says Rajiv Vij, regional managing director in Singapore.
"A huge source of growth for this industry is learning," Vij says.
Many fund management houses help distributors at banks and other institutions train front-line staff about investment. Vij says the academy goes a few steps further, involving a series of courses and a full curriculum. Although Franklin Templeton figured independent financial advisors would attend, it has been surprised by strong demand from major banks such as HSBC and Citibank, which want to use the course to supplement internal training.
"We're also collaborating more with the insurance industry," Vij says. He acknowledges this is in part a distribution strategy - to get more Franklin Templeton products involved in unit-linked sales - but he says for now the real goal is to improve the number and quality of financial advisors.
The firm is also preparing a regional advertising campaign that will focus on the benefits of mutual fund investment, rather than on specific products. "We hope some of these initiatives will trigger other fund houses to do similar things," he says, adding that as a whole, the industry talks a lot about investor education but does a "quite average" job of advancing it.
"Our biggest challenge in Asia is how to grow the retail client base," Vij says, who reckons Franklin Templeton is among the top-three biggest retail houses in Asia ex-Japan, with $16-17 billion of Asia-sourced retail funds under management. "The industry's level of mutual funds penetration in any country is abysmal, with mutual fund assets 5-15% of the size of funds in the banking industry - versus the United States, where the funds industry is bigger than the banking or insurance industries."
The biggest hurdle is cultural. Investors lack awareness of the benefits of mutual funds or long-term investing, and their trading mentality has led to many bad experiences. Unlike the Dow Jones Industrial Average, stock indices in Asia have not made gains over the past decade, which reinforces the instinct to treat funds as ways to punt the market. Many financial advisors - tied or independent - are not well trained. And in many markets, such as Singapore or India, the government provides guaranteed returns on its own products.
Vij is optimistic, however, that this short-term trading pattern can be broken. He says there are positive signs in markets such as Korea and India of retail investors turning more toward regular savings plan-type investments, which remove daily volatility from investors' minds. He is particularly keen on India, where regular instalments involve modest sums and are therefore safer. The firm has combined this with more hands-on seminars across India even where it has no customers, in order to let people to ask questions, and "seed" the market. He claims that in Korea and India, Franklin Templeton has gained 250,000 regular investors in the past 12 months.
"We have to stick to it," he says. "We have to hang in with this strategy for several years, if not 10 years. That will hopefully get other fund management companies to follow suit."