We had discussed the differences between regular and direct plans of mutual fund schemes and the impact on absolute returns in an earlier post. Under direct plans of MF schemes, you save on distributor commissions and thus the returns are higher (than for regular plans). While the returns are higher for direct plans, there is an operational drawback too. Every time you need to invest with a new mutual fund house (mutual fund house you have not invested with before), you will have to visit the nearest office of the mutual fund house once. You can do subsequent transactions (purchase, redemption, SIP registration/cancellation) online. This need to visit MF office was a deterrent to many investors willing to invest in direct plans of MF schemes. This is where MF Utility platform comes to the rescue.
What is MF Utility?
MF Utility (MFU) is an initiative by Association of Mutual Funds in India (AMFI). MF Utility is owned by MF Utilities India Pvt. Ltd, which is equally owned by 25 participating asset management companies (mutual fund houses). All the major mutual fund houses are participants in MF Utility. MF Utility offers a transaction interface to both MF distributors and investors. The focus of this post shall be retail investors and what MF Utility holds for them.
What are the benefits MF Utility provides?
Through MF Utility, retail investors can invest in direct plans of many mutual fund houses through a single interface. You just need to the nearest office and submit CAN Registration form (along with required documents) at the nearest MFU office or point of service. CAN stands for Common Account Number. CAN is an industry level folio number. Your investments with any MF house can be identified using CAN.
Currently, your investments with a particular mutual fund house can be identified with a unique folio number. So, if you have invested with five different mutual fund houses, you will have five different folio numbers. However, under MF Utility, your investments across mutual fund houses can be identified with a single CAN. Mutual fund houses will keep folio numbers but all your folios will be mapped to CAN.
Like other investment portals, MF Utility platform allows purchase/redemption of units and registration/cancellation of systematic investments plans. If you are investing in direct plans through MF websites, you need to remember login details of each MF website. Under MF Utility, you just need to remember details for MF Utility. MF Utility also provides consolidated view/account statements for your investments across the industry.
Limitations of MF Utility
At the moment, retail investors can enter transactions only through the offline channel. The online platform is expected to be made available in the next six months*. Since the online channel has not yet been made available to investors, we cannot comment anything about the interface.
PersonalFinancePlan Take
If the online platform of MF Utility is user-friendly, it will be a serious alternative to various popular online investment platforms such ICICIDirect, FundsIndia, Scripbox etc. Since MF Utility platform allows you to invest in direct plans of mutual fund schemes (which other platforms don’t) from different fund houses, it can save you some real money over the long term. We are eagerly awaiting the release of MFU online platform for retail investors and so should you. For more information about MF Utility, please read investor FAQs on MF Utility website.
*Edited: Initially, I had put the expected date as June 2015. On further enquiry with MF Utility, I was told that this could take up to six months.
Deepesh is a fee-only planner and Founder, PersonalFinancePlan.in
Photo Credit: MF Utility Website