Helping mutual fund investors make strategic & tax-efficient redemption decisions

What was the problem conveyed by the client?

The client identified a significant issue concerning investor awareness and understanding of tax implications associated with redeeming mutual fund investments.

• Lack of User Awareness: Users were not fully aware of the tax implications tied to redeeming mutual fund investments
• Complexity of Information: The intricate nature of tax-related details made it challenging for investors to decipher and understand the implications associated with short-term and long-term investments.

‍

How I approached the problem?

1/ Understanding the structure of tax implications

2/ Benchmarking with other mutual fund brokers

a) Groww Mutual Funds

Groww primarily provides general information about taxes within the "View More" section of each scheme.

• Strengths: It offers information about taxation but lacks specificity to individual scheme investment.
• Areas for Improvement: Tailoring tax information more specifically to individual investment. Since tax information is within the "View More" section, users might not easily notice it.

b) ICICI Prudential

ICICI Prudential segregates long-term and short-term units during the redemption journey.

• Strengths: Offers real-time insights during the redemption process, aiding investors in understanding the tax implications.
• Areas for Improvement: Could provide tax amount according to units.

c) Paytm Money

Paytm Money integrates tax information into the redemption journey as info sections.

• Strengths: Provides tax-related details at the point of redemption.
• Areas for Improvement: May benefit from additional educational components to assist users in understanding the reasoning behind tax implications..

3/ Defining my approach to solve the problem

After benchmarking, I concluded the following:

• ‍Investment-specific insights: Tailoring information of taxes and exit charges for specific schemes.
• Visibility: Improving the visibility of tax-related information.
• Segregation of units: The segregation of long-term and short-term units, enhancing clarity.

I identified two key touchpoints to deliver information effectively: the folio page & the redemption journey.

Folio page: Provides a comprehensive overview of an investor's holdings. This touchpoint will provide guidance for initial decision-making for evaluating adjustments, rebalancing, and strategic changes to the folio.

Redemption journey: The process of selling or redeeming investments. At this point, users are actively engaged and likely receptive to information that can impact their decisions.

‍

How did I design the experience?

To move forward with my designs, I based them upon Hicks Law for minimizing cognitive load while making decisions.

• Reduce the number of choices and steps for users when they need to understand tax details or redeem investments.
• Display key information prominently, minimizing complexity.

The following efforts were made to cater to the problem:

• ‍Educational Messaging: Highlighted that long-term units incur lower taxes, encouraging users to consider the advantages of retaining their investments for an extended period. Illustrated how short-term investments could become beneficial over the long term.
• ‍Visual Presentation: Presented tax-related data in a visually intuitive manner, aiding users in quickly grasping the key points.

In the folio page

• Displayed a clear breakdown of long-term and short-term investments.
• Differentiated between tax amounts for long-term and short-term units.
• Provided information on the tax implications associated with the overall investment.

I have used a dropdown approach for listing Tax implications and Exit Load charges under Investment Insights on the top for visibility.

In the redemption journey

• Calculated taxes on the actual redemption amount during the redemption process.