In an opinion poll conducted by Cafemutual, over 43% or 1642 IFAs said that direct plans have had no impact on their advisory business; altogether 3,819 IFAs participated in the poll.
However, 20%, or 764 IFAs believe that their business have grown since the introduction of direct plans. The remaining, i.e., 37% or 1413 IFAs admit that their business has come down due to direct plans.
The findings are in line with a study on investor behaviour, sponsored by Foundation of Independent Financial Advisors (FIFA) and carried out by Final Mile, a behavioural research company that shows that direct plan investors eventually come back to their advisors once they encounter complexities in mutual fund investments.
Hemant Rustagi, of WiseInvest Advisors, believes that many investors do not understand mutual funds, which is why they opt for regular plans. “Mutual funds are difficult to understand and direct plans are alien to many investors. Also, many people are not comfortable investing on their own; they need the handholding of distributors to invest in mutual funds,” Hemant said.
An AMC CEO, requesting anonymity, said that only tech savvy and financially literate investors invest in mutual funds through direct plans. “Only a small fraction of people, who do everything online, are concerned about saving their 75 basis points for a risk. However, most retail investors still prefer investing with a distributor,” he said.
Opinion poll result
How have direct plans in mutual funds impacted your business?
No impact on my business: 1,642 votes, 43%
My business has grown after introduction of direct plans: 762 votes, 20%
My business has come down due to direct plans: 1,413 votes, 37%
