The discount broking firm, Zerodha, has reportedly become the largest mutual fund distributor in terms of adding new clients, confirmed three sources familiar with the development. Interestingly, Zerodha sells direct plans only.
Launched in April 2017, Coin, Zerodha’s mutual fund distribution arm, manages assets of Rs.1000 crore mostly in equity funds through 60,000 investment accounts. Most of their clients have come from their broking arm Zerodha.
Faisal H Rahman, Product Head, Mutual Fund, Coin told Cafemutual that his company is the leader in the distribution of direct plan. He said, "Creating a SIP on COIN gives alot of flexibility to the client. We do not follow the conventional SIP model where we need collect ECS/NACH mandate forms for debiting the bank account instead the amount is debiting from the trading account. Also, the bank may levy charges if, on any particular installment date, the amount is not available in the bank account. Apart from that, if you want to modify the installment amount then you have to give a new request to the bank. So, if you create a SIP on COIN, you can easily modify, delete or pause the future installments at a click of a button."
Explaining how this feature works, Rahman said, “We promote lumpsum investment plus additional purchase in a systematic matter to invest in mutual fund. For instance, we encourage our clients to start investing in a mutual fund with a lumpsum amount of Rs.5000 and keep aside at least Rs.1000 every month in the form of additional investment. Additional investment gives us flexibility to modify the systematic investments.”
Going forward, the company expects to acquire more retail investors by using eNACH and UPI. "Since, the amount is debited from the trading account through COIN, one challenge is that the client has to transfer the amount always from his bank account to his trading account. UPI and eNACH will fix this issue permanently. So, on every due date of the installment we will automatically debit his bank account and transfer the amount to his trading account to ensure that the order is processed. As of now UPI is already live but eNACH should be available within a month.
“Also, a few fund houses have reduced the minimum application in lumpsum investment from Rs.5000 to Rs.1000. This will further boost our business,” he adds.
Currently, the company works on a fee based model. It charges Rs.50 per month for its mutual fund distribution services. However, the company does not offer financial advice to its clients. It is an investment platform.
