Emergence of online direct plan distributors such as Paytm, ET Money, Zerodha and Paisabazaar has worried many IFAs.
In fact, the latest ET Money advertisement has reignited the discussion around direct plans. ET Money has come with an advertisement called ‘Upar ki Kamaai’ in which it has claimed that investors can save up to Rs.25 lakh on commission if they invest in mutual funds through direct plans. The advertisement has assumed an SIP of Rs.5000 for 25 years and annualized returns of 14% in direct plan and 12.5% in regular plans.
However, most online direct plan distributors to whom Cafemutual spoke to said that they would bring new customers to the mutual fund industry and have no plans to compete with mutual fund distributors. In fact, Vijay Shekhar Sharma, founder and CEO has assured the mutual fund industry that his company would bring two crore new investors in the mutual fund industry within two years. He also said that his company would not compete with distributors; in fact, they will complement them.
In an interview with Cafemutual, Nithin Kamath, Founder and CEO, Zerodha said that online players would help expand the market. He said, “The biggest challenge in India is the very shallow market participation - approximately 20 million Indians investing through mutual funds and 6 million directly into stocks. So growing this is the main problem to solve.”
Swarup Mohanty, CEO, Mirae Asset also said in an interview with Cafemutual that online distributors will not be a threat for the mutual fund distributors. “I see online distribution space as a completely new vertical which will cater to a new set of investors. Currently, a majority of young customers prefer these websites to buy products and they are yet to invest in mutual funds.”
He further said that IFAs would continue to be dominant players in the mutual fund industry since investors need handholding to invest in mutual funds.
Seconding his views, Kailash Kulkarni, CEO, L&T Mutual Fund said, “I think online distributors will complement existing distributors. There are 60 odd platforms offering such services. In my view, they will create awareness about mutual funds. Today, we have around 2 crore unique investors. With entry of these players, we will have 20 crore customers in the future. These 20 crore investors need quality advice and handholding to invest their money in mutual funds. Advisors having better systems and processes in place, such as online execution facility will be in a better position to service this large customer base. However, advisors who are not willing to adapt to these technological changes may struggle with customer retention in future.”
Many industry veterans feel that the mutual fund pie is big enough for every player to co-exist be it mutual fund distributors or direct plan sellers. Moreover, online distributors would largely focus on first time investors who are tech savvy.
