Quite a few readers have approached me to ask the best way to invest in direct plans of mutual funds schemes. I also wrote a post on direct plan platforms that are presently available (do not claim it to be a holistic list). Many want to know the best direct plan platform. Frankly, I do not know the answer myself.
Since most of these investment websites are new, one of the common questions is “What will happen to my investments and SIPs if the investment portal closes down?” The anxiety is, to an extent, justified because all these portals are quite new and do not have proven business models.
In my opinion, there is absolutely nothing to worry about.
By the way, if you are new to the benefit of direct plans, do go through this post.
What if my direct plan portal closes down?
Yes, at least some of these direct plan platforms will close down in the near future. Frankly, in my opinion, many of these portals seem to have pathetic revenue models. Will either need massive scale to be meaningfully rewarding to founders or the founders need to figure out an alternative revenue model.
Or the founders may simply move onto something else. Therefore, it is possible that once you have signed up, nobody answers your phone call (or e-mail) if you call them for support.
Where does it leave you now?
Well, you should be quite ok.
Even if the portal closes down, that does not mean your investments made through such portals will also vanish.
You can still access your investments easily.
All the mutual fund transactions go through Registrar and Transfer Agents such as CAMS and Karvy. You can any day register into those websites (CAMS, Karvy websites) and check your portfolio.
If you don’t trust me, try this out today. Register on CAMS/Karvy sites. You will be able to see investments made through any platform under CAMS/Karvy/Other RTA portals.
Alternatively, you can check your investments by registering and logging into AMC portals.
If your investment portal is CAN (Common Account Number) based i.e. it uses MF Utility as its underlying transaction platform, the transition can be even more seamless. You simply need to request online access from MF Utility (since you already have CAN). And you can continue. All the investments under CAN will be seen under MFU portal. Alternatively, you can switch to another direct plan platform that is CAN based.
What about my Systematic Investment Plans?
This is where you might feel a bit of heat.
For instance, to start a SIP, you need to fill up and submit One-Time Mandate form to the portal (service provider). This form gets eventually reaches your bank. This ensures that your bank lets the service provider (investment platform) debit your bank account for SIP installments. With MF Utility, this form is called PayEezz.
If you are moving from one MFU based platform to another, you don’t need to do anything. You are good to go. In my opinion, even your SIPs will continue.
If you are moving from MFU platform to say CAMS portal, you need to give a fresh One-Time Mandate form to CAMS.
Whether the existing SIPs will stop? I am not too sure of this. It depends on how the money is routed to the AMC. Shouldn’t happen at least with CAN based platform. This problem is not too big to sort out. Your money and investments will still be safe.
What you need to focus on?
- Assess if the cost structure suits you. A few have fixed annual fee, a few charge per transactions while others may charge an asset-based fee. There could be alternate business models. You need to select the best for you based on your transaction pattern. By the way, a few are free too.
- It is possible that you may not like the analytics on some of the platforms. I believe all the platforms provide free trial. Try out before signing up.
- Almost all of them will have small teams. You can simply dial the contact numbers and request to talk to the founders. In fact it is quite possible that one of the founders will pick up your call. Clarify all your queries before signing up. Sign up only if the founders sound honest and competent. You can even ask them “What if you close down?” 🙂
Please understand I am writing this post about various direct plan platforms as transaction platforms.
Many of these portals advertise themselves as Robo-advisory platforms. I am in no position to comment on the effectiveness of their models if they have any. Having a curated list of funds and allocating your money to various funds after asking you five questions is, in my opinion, not robo-advisory.
However, you must appreciate the conflict of interest here. I am a Registered Investment Adviser too. Even though our client niche may be very different, such platforms do offer a threat to my practice. Therefore, I may have vested interest in showing the advisory feature of these platforms down.
What should you do?
Don’t be paranoid. Try out one of these portals if you want to invest in direct plans online.
You will face a few problems here and there. That happens with any technology platform but the issue should eventually get sorted out.
So far as investment platform (to execute transactions) and information presentation (returns, capital gains etc) is concerned, these platforms should do a very good job.
About the advisory part, you can decide on own.
Which direct plan investment platform do you like?