Over the last five years, Chennai-based software professional Murthy Manda, 36, has changed his mutual fund agent thrice. And every time with the same result-the new agent would sell new funds or push the ones which got him higher commission. But last August, Murthy decided to do away with the agent altogether and take charge of his mutual fund investments. Today, he does everything-from research and finding good funds to filling the application form and sending it to the fund company's office. He also regularly checks fundsindia.com for the latest news on funds and sometimes buys funds online.
But Manda's transformation into a do-it-yourself-investor was not prompted by self-serving agents alone. It had also to do with the reforms introduced by the Securities and Exchange Board of India (SEBI) last year, which banned the entry load charged by fund houses and introduced fund transactions on stock exchanges in an effort to bring in greater transparency in selling funds and make them available to a larger universe of people. As these reforms opened up multiple platforms that made buying mutual funds easier, while allowing investors to make informed choices, people like Manda were too happy to dump their agents and take charge of their affairs.
For Do-It-Yourself Investors | ||
| OPTIONS | Services offered | Fee |
| fundsupermart.co.in | Fund execution-buy, sell, switch, SIP. Comparative fund research, risk-return profiling, interaction with overseasinvestors and fund managers. | Free |
| Mutual Fund websites | Fund execution-buy, sell, switch, SIP. Account maintenance. Information on products, fund manager commentary. No peer comparison available. | Free |
| powermf.com (to be launched soon) | To buy and redeem funds. To allow comparative fund research, personal advice facility at a later stage. | To charge account opening fees, maintenance and per transaction fees. |
| Camsonline.com | Portfolio maintenance and tracking services. | Free |
| fundsindia.com | Fund execution-buy, sell, switch, SIP. Comparative fund research, risk-return profiling. | Free |
For Investors Who Want an Advisor | ||
| National-level distributors like Birla Sun Life Distribution, NJ India Invest, Bajaj Capital | Fund execution-buy, sell, switch SIP- and portfolio monitoring available in both offline and online mode. | Various packages based on the services - transaction, fund advice and financial planning. |
| Bank/broker online platforms like icicidirect,com and sharekhan.com | Fund execution-buy, sell, switch, SIP. Comparative fund research risk-return profiling. | A lumpsum annual fee based on portfolio value or number of transactions. |
| ifastfinancial.co.in | Independent financial advisors give personalised advice and fund transactions services. | Free |
| BSE/NSE Brokers | Fund execution services - buy and sell only. | Nominal brokerage fees, demat charges. |
The asset management companies (AMCs), too, have been forced to explore different distribution platforms, thanks to the ban on entry load (upfront commission), which caused several traditional distributors like banks, post offices and finance companies to stop pushing mutual funds. AMCs are now looking to reach investors by educating their existing agency force of independent financial advisors (IFAs) in advice-based selling.
They are also trying out new distribution models such as enabling their own websites for online transactions, and by empanelling with the new set of intermediaries that provide online research and fund transaction services to investors. As a result, there has been an unprecedented expansion of distribution platforms for mutual funds over the past 7-8 months.
If You Are a Do-It-Yourself Investor
Take the case of 32-year-old Arun Ramkrishnan, a technical architect with Hexaware Technologies in Mumbai, who got hooked on to mutual funds only last year, as he couldn't rely just on his bank manager's tips. "The relationship manager at the foreign bank often advised me to invest in funds but he only pitched new mutual fund schemes," says Ramkrishnan who began investing in funds after his wife introduced him to fundsupermart.co.in, an online fund research and execution platform. The website helped him assess his risk-return profile and recommended funds accordingly. Now he has parked 60 per cent of his savings in equity funds through the website. Till a few years back, online platforms that enabled investors to do their own research and also helped in executing the transactions didn't exist.
Arun Ramkrishnan, 32, Software Professional, Mumbai
"I began investing in funds after my wife introduced me to fundsupermart.co.in. I prefer to do my own research for financial decisions and not rely on an agent or advisor" |
Powermf.com, which is currently testing a beta version, is a similar platform but has a fee-based service. It costs Rs 320 to open an account. It also levies a maintenance fee ranging from Rs 299 to Rs 999 and transaction charges ranging from Rs 12 to Rs 60 for both one-time purchase and systematic investment options. "Our key proposition is execution. The investor may take advice from anywhere, but our platform will provide full transaction services. We may introduce advicebased package at a later stage," says K. Sridhar, Promoter, powermf.com. Share and mutual fund registry firm CAMS also has an online platform where investors can track and maintain their fund portfolios.
These online platforms score over the AMC websites as these help you in comparing returns and in maintaining track of investments across different funds. The AMCs, too, have revamped their websites to facilitate buying by investors, but have deliberately kept a low profile for fear of irking their traditional distributors. So, do check out your AMC's website to see if it has become more accessible and informative.
Birla Sun Life, for instance, has been sending emails to its existing customers to come online and make additional purchases. UTI Mutual Fund has tied up with more than 20 banks for online payment facility. However, if you are investing across multiple AMCs, then using each fund's website could complicate the process, as you will need to remember the online account details of each website, besides a separate online tool to maintain a consolidated fund statement record.
If You Need an Advisor
The proliferation of online platforms does not mean that the traditional fund sellers like banks and national and regional distributors have altogether stopped pushing mutual funds and giving allied services such as filling and delivering forms, fund recommendations, etc. They still do, but at a cost. In fact, many of these distributors have segregated their transaction, advisory, online and financial planning services, and even started providing an online platform and payment services for their IFAs and investors.
Murthy Manda, 36, Software Professional, Chennai
"Being an investor for many years, I have developed an understanding of mutual funds. I compare fund performances through various websites, and make my own decisions now" |
Bajaj Capital, for instance, doesn't charge any fee for sending and delivering application forms to the AMC office. But if the investor wants to get a consolidated account statement on a periodic basis, online services and a monthly recommendation of funds and the advice of a planner, its annual fee is Rs 2,500. Similarly, ICICI Direct, the leading online stock trading portal, doesn't charge any fees for transaction if the value of the portfolio is more than Rs 8 lakh.
For any amount below this, it levies a fee of Rs 100 for a single transaction and Rs 30 or 1.5 per cent (whichever is lower) for a SIP transaction. You can also buy and sell funds through your broker provided you have a demat account. Like share transactions, the fund transactions will get reflected in your demat account. But brokers may charge a broking fee for such transactions. However, if you don't have a demat account, you can still buy funds through the broker, but it will add up to your total cost of investing. But be careful not to always rely on broker tips.
"There is an inherent conflict of interest as a broker will make a meaningful profit if the volume of transaction is large or if the investor buys and sells funds frequently which will add up to the broker's commission," says the CEO of an AMC who didn't wish to be identified. The reforms may have empowered investors like Murthy and Ramkrishnan by offering a number of platforms through which to buy funds, but the traditional distribution channels account for the bulk of investors.
For most of the large AMCs, the online investor base isn't more than 6-7 per cent, even though this percentage has gone up from about 3-4 per cent over the past few years. As for investors who trade in funds through brokers on the Bombay Stock Exchange and National Stock Exchange, the number of such average daily transactions has gone up marginally-from 24 and 13 to 39 and 31 on the BSE and the NSE, respectively.
However, with the infrastructure gradually falling in place, the number of do-it-yourself investors is only going to grow. Says Ashu Suyash, Managing Director and Country Head of Fidelity International: "Investors still have a lot of unanswered questions in their minds, which, I believe, will settle down once there is more awareness and financial literacy."
GETTING FRIENDLY
