Mumbai: You used your cell phones to text your friends, family, colleagues, browse internet, and click pictures. Now investors can buy a mutual fund by just sending an SMS.
In what can be called as a trend setter for the mutual fund industry, IDFC Mutual Fund has allowed investors to invest less than Rs. 1 crore as well as redeem mutual funds in its IDFC Money Manager Fund (Treasury Plan). It plans to extend the same facility to other funds as well in the days to come.
The investor doesn’t need to sign a cheque every time he wishes to invest. Just one SMS can help him buy funds on the same day’s NAV, thanks to the electronic time stamping mechanism.
What makes this initiative different from the already existing mobile buying facility is that investors don’t need to own a GPRS or smart phone with high speed internet connection. India has more than 72 crore mobile phone users and the potential seems huge.
The facility is currently available for sole proprietors, resident individuals (including guardians on behalf of minor). The AMC has tied up with SBI, Standard Chartered, Kotak Mahindra, HSBC, Axis Bank, ING Vysya Bank, Citibank and plans to extend the facility to more banks going ahead.
How does it work?
The investor needs to sign a onetime debit mandate form & submit at any of the CAMS office or IDFC AMC branches. The commissions will be given to distributors as per the default broker code mentioned in the mandate. If there are multiple brokers in the scheme, the last transacted broker would get the commissions. To encourage distributors to promote this facility, IDFC is giving a trail commission of 75 basis points in the first quarter, 60 in the second quarter and 40, which is the normal commission from the third quarter.
It takes 15 days for this facility to get activated. The investor receives a confirmation after which they can start transacting. For purchases one needs to send an SMS - Inv < space> amount to 56767267 and for redemptions type Red <space> Amount to 56767267.
The investor will receive a return SMS from CAMS confirming receipt of request for transaction mentioning the date, transaction amount & time of receipt. He can also open a zero balance account.
Fund houses have been increasingly embracing technology to save costs in order to reach out to more investors. AMCs also allow investors to buy funds through debit cards also. Most AMCs allow transactions through their websites and the response has not been encouraging. Similarly the stock exchange platform is yet to take off in a big way. The existing online investing platforms like iFAST, FundsIndia do not boast of huge volumes. This shows that investors not all investors are open to the idea of virtual investing.
On the anvil is AMFI’s MF Utility platform which will allow investors and distributors to put orders to transact across all AMCs. BSE is also planning to allow investors buy funds through mobile phones.
What makes IDFC’s SMS facility unique is its simplicity, ease of investment and its potential to become the game changer in MF industry. It remains to be seen if other AMCs follow suit.