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Celebrity endorsements in mutual funds: What difference will SEBI order make?

The Securities and Exchange Board of India issued a new advertising code allowing celebrities endorsements for Mutual Funds. tries to understand the impact it will have on the category

Celebrity endorsements in mutual funds: What difference will SEBI order make?

The Securities and Exchange Board of India issued a new advertising code allowing celebrities endorsements for Mutual Funds. tries to understand the impact it will have on the category

Roshni Nair | Mumbai | March 21, 2017


The Securities and Exchange Board of India (SEBI) recently passed a new advertising code allowing celebrity endorsements for Mutual Funds.

In a circular released by SEBI, the capital markets watchdog said, “Celebrity endorsements of Mutual Funds shall be permitted at industry level; however, not for endorsing a particular scheme of a Mutual Fund or as a branding exercise of a Mutual Fund house. Further, prior approval of SEBI shall be required for issuance of such advertisements that feature celebrities.”

While celebrity endorsements have been allowed for other sectors in the finance world like the insurance sector, this will be the first time Mutual Funds will be allowed to use the star power of a celebrity.

Commenting on how this could be a positive news for the category, a senior official in the BFSI sector, on the condition of anonymity, said, “Look at it this way, if there was a pyramid, at the top of the pyramid would be your basic level banking transactions which are actually individual needs. So you go to a bank to either deposit your money or borrow money, that is the basis, then you have other related pieces like credit cards, etc. Next in line would be segments like Life Insurance which are again basic needs. Then comes your general insurance like mediclaim or car insurance. Mutual Funds on the other hand is a niche piece. It has always been at the bottom of the pyramid in terms of retail participation. People are really scared if it will burn their hard earned money, etc. We usually use celebrities to increase awareness levels for a category or a product. So celebrities can be used to make Mutual Funds a little bit more visible.”

Rohan Mehta Rohan Mehta

Corroborating his views is Rohan Mehta, CEO, Social Kinnect. Social Kinnect is the agency behind PNB Metlife’s ad communication.

“The mutual fund industry needs a lot of awareness. Currently less than 2 per cent of the country's population knows what a mutual fund is. Celebrity endorsement is a great tool to spread awareness. This will surely bring more eyeballs to the mutual fund advertisements and help brands spread awareness about this financial product at a whole.”

But why have celebrities endorsements not been a part of Mutual Funds’ ad communications?

Answering the question, a source said, “Mutual Funds are largely sold on a return basis. They show how much did this fund deliver in the last one year, three years, etc., and when a celebrity starts endorsing a particular fund house it means that there is a direct endorsement of the returns that the Mutual Fund is generating. So, what the regulator has been wanting to do is use celebrities to up the game for Mutual Funds overall at a category level. For example, Amitabh Bachchan can come on screen and represent Association of Mutual Funds of India (AMFI) and he can say how Mutual Funds can improve your life or demystify Mutual Funds.”

While celebrity endorsements may help in creating awareness for the category, Mehta warns that brands need to be responsible when using celebrities.

“Brands have to be responsible and should clearly communicate the offerings and risks of the product while promoting it. Celebrities should be used to put a face to a brand that will build recall value and increase the reach of the ads.”

Sanjay Tripathy Sanjay Tripathy

Sanjay Tripathy, Senior Executive Vice-President, Head Marketing, Analytics, Digital & E-Commerce, HDFC Life, feels that celebrities only play a small role when it comes to communication in the financial sector.

“It is my belief that there is only a limited role that a celebrity can play for brands operating in the financial sector. The insurance sector has been allowed to use celebrities; however, one finds very few brands using celebrities. This is essentially because in this sector, at best a celebrity can help you gain attention or awareness while such awareness itself may not result in actual sales. In some of the other categories like fashion or FMCG, celebrities can actually drive affinity or even sales. And that then helps justify the huge amounts one has to pay for such endorsements. Having said that, we have managed to use celebrities well to drive testimonials as in the case of HDFC Life Cancer Care where we used cancer survivor Lisa Ray. Her story was real and we used it to emphasise on the need for a cancer protection product. Others like Exide Life used Dhoni to drive awareness for their brand post re-branding-- the time when the salience was important.”

Also, drawing attention to the cons of celebrities, especially in the finance sector, Tripathy said, “Another caution on using celebrities to build a brand is the risk it comes with. If the celebrity’s image takes a hit so does your brand. And such a hit often tends to have significant repercussions for financial brands where trust is key.”

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