If there’s one brand that’s synonymous with disruption in the Indian market, it has to be Jio. Mukesh Ambani’s smart move of buying the only company that won the pan-India 4G license was a masterstroke that led to Jio’s commercial launch in September 2016.
Since then, Jio has become an all-encompassing brand, offering more than just mobile data- high speed fiber optic internet, smartphones, OTT, News and a whole suite of apps that aim to rival standalone brands in their niches. Now, Jio’s partnership with BlackRock aims to disrupt the MF industry.
The question is, can it?
BlackRock’s hope with Jio
BlackRock Inc is the world’s largest asset management firm with assets worth $11.7 trillion. Though it remains invested in many Indian companies, getting into the retail investment industry is a completely different ballgame. Its first stint in the industry with DSP group ended in 2018 over DSP’s desire to control the company, which was the ninth largest MF by Assets Under Management (AUM) at the time. In its second innings, BlackRock aims to piggyback on Jio’s pan-India reach to disrupt India’s Rs.72 lakh crore MF market.
But this cannot, and will not, be a cakewalk.
Reason 1: The MF industry depends on long-term trust, not short-term hype
Most analysts agree that Jio’s predatory pricing and deep discounting will not work here. Mutual Fund investments require a deep level of trust and a consistent performance track record. This is primarily because mutual funds are ‘push’ products, which require a degree of trust and accountability that is not possible with online hype. No elaborate marketing campaign has worked when it comes to convincing people to invest in risky equities; only the neighbourhood MF distributor can offer the trust and support needed, just like buying life or health insurance policies. The partnership aims to eliminate the role of these Registered Investment Advisors (RIAs) completely, something that Paytm and Zerodha have tried, and have yet to show results.
Reason 2: Most newbies haven’t made a mark yet
First movers in the industry like HDFC, ICICI, LIC and Kotak Mahindra have cornered around 47% of the market, even as newer Asset Management Companies like Paytm Money, Zerodha and Bajaj Finserv have yet to make a mark, despite having a similar reach through their respective brands. Though Jio aims to start with low-cost and low-risk index funds, the fact that these funds are commoditised and cannot have a differentiating factor will not help.
Reason 3: Strict regulatory framework
Jio’s massive reach wouldn’t help in scaling the AMC’s operations. Unlike the US, where auto-debit for redemptions is permitted, SEBI does not even allow automatic execution of trades or rebalancing. Add to that the high degree of bureaucratic micromanagement, where you need SEBI permission for advertisements along with a fee upto Rs.6000 per campaign and countless other approvals to control operations, Jio BlackRock will have a tough time disrupting the industry.
How will they do it?
Jio has managed to disrupt industries where they can leverage scale and capital, but financial advisory is a completely different ballgame. Though parent company Jio Financial Services can still hope to disrupt the lending space, how Jio will manage to disrupt the high barriers of the Mutual Fund industry remains to be seen.
