Paisabazaar’s mutual fund ad sparks debate

Paisabazaar’s latest advertisements featuring Akshay Kumar have kicked off a debate over the use of brand ambassadors to promote digital platforms selling mutual funds. The Association of Mutual Funds in India (Amfi) has directed Paisabazaar to seek approval from the Securities and Exchange Board of India for commercials featuring celebs.

“Amfi has directed Paisabazaar to seek Sebi’s approval before using celebrity ads so that they are not in violation of the ad guidelines laid down by Sebi,” Amfi Chairman A Balasubramanian said.

To be sure, Amfi does not have regulatory powers like Sebi. However, it often advises participants on best practices for the industry. According to sources, the market regulator is looking into the issue following complaints from some industry players. However, the ads have gone live on popular social media platforms.

Paisabazaar, which recently forayed into online mutual fund distribution, has come out with a 20-second video clip featuring Kumar. The ad, which talks about the benefits of investing in direct plans, has already got 1.6 million views on YouTube. There are also SMSes doing the rounds that claim “Mutual Funds ke liye Paisa Bazaar Sahi Hai”.

A week ago, G Mahalingam, whole-time director, Sebi, said the ~23-trillion mutual fund industry needed to be cautious while spending big bucks on advertisement, since investors might be misled.

In a circular issued last year, the market regulator said celebrity endorsements could only be done at an industry level

for the purpose of increasing awareness about mutual funds as a financial product category. The circular went on to say that endorsements should not promote interests of any one particular scheme or a fund house.

Industry players said Paisabazaar’s latest ads could be based on the interpretation of Sebi's new norms, which allow celebrity endorsements at the industry level. The ads could prompt Sebi to clarify on the issue on whether brand promotions by universal platforms should be construed as industry-level ads.

An earlier Paisabazaar commercial, launched in January, had claimed that direct plans were the secret to higher returns since they saved on distributor commissions. However, this ad did not have any celebrity endorsement.

“If proactive steps were not taken to address such ads, it could lead to a dangerous precedent for an industry, which is seeing huge investor interest from global funds that chase big returns,” said AK Narayan, former president, IFA Galaxy, a Chennai-based IFA association.

“As individual distributors or IFAs, we cannot compete with the private equity-backed start-ups like Policybazaar or Paisabazaar,” according to a distributor.