Do celebrities need to endorse MFs?

Why can't mutual funds use celebrities for promoting their schemes? Is the fund industry treated unfairly by barring it from doing celebrity endorsements?

Ajay Bagga, chief executive officer, Lotus India Mutual Fund, had said during a seminar early this week, "Mutual fund industry is the only category where celebrity endorsement is not allowed whereas even insurance companies use celebrities to promote their products. We should also be given a level playing ground."

The responses from senior executives from mutual fund houses and advertising agencies were mixed. While some advised caution, others opined that the fund industry should be treated on par with other industries where celebrity endorsements are allowed.

A senior advertising company official said things had gone wrong earlier when celebrities were roped in for brand promotion.

"The advertisements of Home Trade (the company which went bust in early 2000) had three outstanding brand ambassadors, Sachin, Shahrukh and Hrithik Roshan.Though the brand was able to capture a lot of eyeballs it did not deliver. In the past, people have lost lot of money putting it in firms endorsed by celebrities.Companies have used filmstars who were given seats on their board of directors, for promoting public issues and when the company goes bankrupt investors lose all their money in the end."

Even Bagga himself admits that celebrity endorsement is a double-edged sword. Jaideep Bhattacharya, chief marketing officer, UTI MF, however, said, "Celebrity endorsed products reaches more quicker compared with non-celebrity endorsed products. It reaches the target audience and helps in sharing capital market benefits with larger audience," he explains.

R S Srinivas Jain, chief marketing officer, SBI Mutual Fund, said, "There should certainly be a level playing field but it is a wise thing not to allow celebrity endorsement in mutual fund. Investors have to make wise choices and the regulator is right in not allowing celebrity endorsement in mutual funds."

"Mutual fund is a fiduciary product. We give no guarantee of returns unlike in case of a bank or an insurance company. We only give hope to investors but there is no commitment as mutual fund is a risky business and the education level with regard to financial market is very low. Though frankly speaking even in insurance products it should not be allowed," said a highly placed official of a top Indian fund house in terms of anonymity.

However, he admitted celebrities draw a lot of attention and said that a time may come when celebrity endorsement will be allowed.

Pranesh Misra, President and COO,Lowe Lintas, India, said,"Celebrity endorsement adds credibility to the brand. If allowed, it would help mutual fund business to grow dramatically, but investors should be aware that when it comes to their investments, they should not follow celebrities blindly."