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MF News Direct plan seller Zerodha opens 60000 accounts in 11 months

Direct plan seller Zerodha opens 60000 accounts in 11 months

The company may be the largest MF distributor of direct plans.
Nishant Patnaik Mar 20, 2018

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.

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10 Comments
Layman Kumar · 5 months ago
All these direct plans by service providers is a honey trap ,why shud any one offer free service ,no one gives lunch free of Cost ,let's wait and watch ,time will tell
Aam Aadmi · 5 months ago
Zerodha charges Rs 50 per month after first 25000 of investments. So they are making something, but is that enough to survive as a business?
Reply
Sanjay Bangar · 5 months ago
Rightly said, there is nothing free in this world. Even, one can get some remuneration from AMC if we source handsome amount in direct plans. I can prove the same.
Shashank Rane · 5 months ago
AB
Last updated 5 months ago
Amit · 5 months ago
Equity market is highly volatile
Need risk assessment for every individual differently . Fund performance observations is also required . So direct or regular plan advisory is must
Amit · 5 months ago
It's only investment made easy not .quality of advisory . It's just like taking one medicine for all deasis .
Snadeep · 5 months ago
You are correct Amit, We cannot have single medicine for all diseases. One can buy Mutual Funds regular or direct but Advice to opt for it is necessary! We at moneyfrog.in follow same principle. Advisory and Planning is key
Reply
Amit · 5 months ago
So all quality advisor should not worry listen carefully your client . Instead of speaking more . Machine can not replace human .
KL Kalyanakrishnan · 5 months ago
Direct schemes are good for people who are able to do the research and study on their own. Today the situation is totally different. People have money but no time to do any sort of research or study. An IFA hand holds the investor through goal-based planning, which is not there in direct selling. Besides this, the statistics shows that those who have invested through direct schemes exited the whereas the investment routed through IFAs, which are ear-marked to various goals remained invested.
Zabiulla Khan · 5 months ago
There is a catch in this this business model.
Once your total investment in direct funds is >25k Rs.50 is charged every month till you stay invested in the fund i.e if you invested 25k or more they charge 600 annually (Direct mutual fund monthly Rs.50 service charges) + 300 annually (Demat a/c AMC to hold your Stocks & MF in demat form) till you redeem.

For example we invest in an open ended or closed ended (ELSS) fund & stay invested for at least 3 years as there is a lock-in period for ELSS you pay 600x3 years = 1800 (Direct MF service charges)
If you hold on to your investment for longer period this will only go up north.
In regular funds you pay anywhere between 0.5 - 3.5% approx Rs.125 - 900 on 25k. (One time only)

Clearly there is a huge profit margin.

* Plus quarterly trial commission is also applicable if it is paid out to distributor's who sell direct plans.
* Trial commission is 0.05% quarterly paid on total amount of AUM (Assets under management)
If trial commission is paid quarterly on 1000 crores @ 0.05% quarterly = 5 Lac every quarter.
Rs.20 Lac annual trial commission additional revenue apart from service charges, not bad right?

Clearly it is a very lucrative business for such little efforts & digital products.

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