Mutual Funds: Taking Financial Education to the Marketplace

Nume Ekeghe, who encountered an experiential marketing project on mutual funds by Stanbic IBTC Group, writes on the imperatives of financial literacy on mutual funds in Nigeria

What is the feature that most distinctly separates the successful from the unsuccessful, the rich from the poor? While the answers to this question may vary, depending on whom it is posed to, perceptive and successful investors are likely to tell you that knowing how to make your money work for you would rank high in this regard. The most successful investors know how to put their resources to work, or as they say in financial circles, ‘sweat their assets’. This way, one does not need to pass through life perpetually trapped in the rat race of “chasing” money in a bid to make a living. Rather, regardless of the stage of one’s life, one can actually spend reasonable quality time, enjoying his passion whatever that may be, confident in the fact that his resources are not sitting idly in the bank or elsewhere but are in fact working hard to multiply.

This is the message that the Stanbic IBTC Group appears to be taking to cross sections of Nigerians across the country, urging them to make their money work for them. Stanbic IBTC Group, by the way, is a group of financial institutions that include a bank, an asset management company, a pension fund administrator, a stokbroking firm and many more and is a member of Africa’s leading financial services group, Standard Bank.

The organisation, in what would ordinarily be an unlikely set-up for a financial institution, chose the main entrance of the ever-busy Ikeja City Mall. The City Mall is itself a sprawling shopping centre with a multitude of shopping centers, which has become a magnet of sorts not only for shoppers but also movie goers, sight seers and people just seeking a bit of fun outdoors. The organisation had “set up shop” atop a small stage covered in its trademark blue rug. Therein were a number of chairs and tables with which its consultants dished out counsel to as many visitors as were sufficiently attracted to the podium as to inquire about the services being canvassed. Elsewhere, there were “salesmen” dressed in t-shirts, doling out leaflets and generally engaging passersby on a one-on-one basis. Somewhere at the corner of the podium was a dispenser, dishing out varieties of non-alcoholic cocktails. Clearly, the organization was keen to ensure that visitors left with a remarkable experience of the Stanbic IBTC brand, however brief was their encounter.

About Mutual Funds

Today, said the consultant who engaged me, one Okeremute Iwhiwhu, a relationship manager, Stanbic IBTC was promoting the concept of Mutual Funds. I had never heard the term before and promptly said so. Well, mutual funds, said Iwhiwhu, are “a kind of collective investment scheme.” Would that be something like Esusu, I asked. Esusu is an age-old collective investment practice in which a group of people typically business associates, work mates or even friends, each contribute a certain fixed amount of money into a pool at a fixed period usually monthly. Each member of the collective becomes a beneficiary of these pooled funds at specific periods of the contributory cycle. Esusu has proven to be very popular across Nigeria and especially among the unbanked, where it represents a savings account of sorts.

Mutual Funds, said Iwhiwhu are like Esusu in being a collective investment scheme, but that is probably where the similarity ends. For instance, Esusu is not likely to earn one any interest. Mutual Funds, on the other hand, he said, give you a return on investment.

Shedding more light on the essence of Mutual Funds, Iwhiwhu explained that mutual funds are a professionally managed pool of funds from many investors, which is deployed towards purchasing securities.

Stanbic IBTC, he said, has a portfolio of seven different mutual funds. Different mutual funds have different objectives, different time horizons and are subject to different risks. The objective, risk appetite and time horizon of the particular mutual fund, tend to determine the return on the investment to the investor. As is typical with investment, often the higher the risk with the particular mutual fund, the higher is also the potential return on investment.

Given that the Mutual Funds phenomenon is still very new to Nigerians, the organisation, he explained, was currently promoting the fund with the lowest risk. The Stanbic IBTC Money Market Fund (SIMM), which is being aggressively promoted, Iwhiwhu explained, invests only in money market securities, namely, treasury bills, commercial papers and fixed deposits. The SIMM mutual fund essentially scouts for investment opportunities in the money market arena and the returns on those investments are shared by all investors who have contributed to the pool.

Democratising Investment Opportunity

For as relatively “small” an investment amount as N50,000 he said, an individual can enjoy returns on his investment at a rate that would ordinarily be reserved for big institutions. Herein, he explained, lies one of the big advantages of mutual funds over many other types of investment, the fact that even a small time investor like a salaried worker can participate in and enjoy the benefit of large scale investments that are typically only available to large scale investors. Moreover, being professionally managed, the mutual fund benefits from the research and indepth market knowledge required to make the most profitable investment decisions, a resource that is not likely to be available to the individual small time investor.

Another big advantage of the mutual fund, he explained, is that a mutual fund typically invests in a diverse number of securities. Diversifying reduces the risks of say investing in a single stock or bond. Again, this is particularly advantageous to the small time investor whose relatively “little” funds would ordinarily not permit him to invest in a diverse number of securities even if he wanted to. Pooling his funds alongside those of other investors, under the professional management of experts avails him this unique opportunity.

Mutual funds, he explained, are also very flexible and shareholders depending on conditions that are specified in the prospectus of each fund, may even trade their holdings with the fund manager at the close of a trading day based on the closing net asset value of the fund’s holdings.

Great Alternative to Savings Accounts

Mutual funds, said Iwhiwhu is clearly a great alternative to the savings account and the Stanbic IBTC organisation is making every effort to popularise the concept through systematic financial education. Apart from the Money Market Fund, other mutual funds in the organisation’s portfolio, he explained are the Stanbic IBTC Guaranteed Investment Fund, the Stanbic IBTC Bond Fund, the Stanbic IBTC Balanced Fund, the Stanbic IBTC Iman Fund, the Stanbic IBTC Ethical Fund and the Stanbic IBTC Nigerian Equity Fund. Each of these respective mutual funds is associated with a different objective, different risk profile as well as different returns. The Stanbic IBTC Nigerian Equity Fund being the most risky also promises the highest returns.

Experiential Marketing

In a country where financial literacy is generally acknowledged to be low, there is certainly justification for every activity that seeks to demystify finance and make the subject one that everybody, regardless of status, finds approachable. This will ultimately be a veritable complement to efforts at enhancing financial inclusion across Nigeria. For, the more the banking sector makes the effort to connect with the regular Nigerian, seek him out in places he frequents, speak with him in a language he understands and avail him with products and services that can add value to his life, then the more will he see value in banking and the more will he be inclined to adopting or increasingly engaging its services.

The financial education program at Ikeja’s City Mall, said Iwhiwhu is only one of several programs that targets such popular avenues across the country. So far, he says, impact of the program has been very encouraging. It has provided many people with an insight into different possibilities by which to profitably deploy their resources and a good number have signed up for the mutual funds.

So do not be surprised if while visiting your favourite bar or restaurant in the near future, a smiling well dressed lady or gentleman invites you over to a small classy designated section for a quick chat on how to make your money work for you. It may the best five-minute chat on money that you will ever receive.