Direct MF plans made convenient

If you have not been investing in direct plans of mutual funds (MF) because of the cumbersome procedure, you can consider doing so now. You can transact in direct plans of MFs online through the MF Utility platform. You can transact in direct plans of up to 25 fund houses, which are linked to MF Utility.

Till now, it was possible to invest in direct plans physically. If you wanted to do it online, you had to do it through websites of individual fund houses, which denotes keeping track of multiple utilizer IDs and passwords. Withal, you had to get utilized to multiple web implementations/procedures of sundry fund houses. The MF Utility platform is one more option to transact in direct plans online.

Direct plans have not picked up even two years after they were introduced. One reason is that most retail investors prefer to invest through financial advisors, who often offer them conventional plans. Retail investors need advice with culling the orchestration, monitoring the portfolio, deciding how much to invest, and when to redeem, etc. Until now, aliments of direct plans were not available to advisors.

Hence, advisors could not track their clients’ investments and conventionally advised them to go for conventional plans, whose victuals were available to them.

With the Securities and Exchange Board of India (Sebi) recently asking fund houses to apportion victuals of direct plans with Sebi-registered independent advisors (RIAs), now they can advise their clients to invest in direct plans and withal monitor the clients' portfolios. However, it is not currently available to distributors.

“Until now, it was not possible to provide reports or advice on direct plans to clients. Now we would be in a position to do so, with the victuals/data being made available to RIAs,” verbally expresses Suresh Sadagopan, an RIA and founder, Ladder7 Financial Advisories.

The most sizably voluminous advantage of direct plans is the cost advantage. The expense ratio for customary plans are 2-2.5 per cent, because the fund house pays commissions to distributors. While it might not matter much in case of investments of Rs 5,000-10,000, for a substantial amount and over a long period, the difference can be consequential.

The incrementing popularity of robo advisories, additionally, might inspirit more investors to switch over to direct plans. Robo advisories do the peril-tolerance analysis predicated on fine-tuned parameters and give advice on where to invest. If these robo advisories enable direct plans, investors with fundamental needs will find it more facile to invest in direct plans through them. Others who have more sophisticated requisites would pay for the advice and invest in direct plans through the available platforms such as MF Utility

Now even platforms like FundsIndia can technically offer direct plans, if they optate to. These platforms only offer customary plans and get commission from fund houses. But, they offer advisory accommodations free to investors.

“The intermediary has to be paid in some form - either by way of commission or fee. So, for investors, the distinction between direct and customary plans is a very thin margin, unless an investor does it consummately on his own,” he points out.