More and more retail investors are opting for direct plans to invest in mutual funds. At the end of June this year, 12% of the MF industry’s total retail assets came through direct plans. A year ago, the number stood at 10%, shows AMFI data.
For HNIs, investment in MFs via direct plans has increased at a faster pace. By the end of June this year, 22% of the MF industry’s HNI assets came via direct plans. The number has risen from 18.9% in June 2018.
Experts attribute the rising popularity of direct plans among investors to the increasing number of RIAs, especially online distributors like ETMoney and Paytm Money. Growing awareness about direct plans through AMFI campaign has also played a key role in direct plan’s popularity.
Jimmy Patel, MD & CEO, Quantum MF said that since such apps ensure ease of investment and do not charge any commission while offering direct plans, they have appealed to many retail investors. “Investment through these apps could be more popular, if they start providing servicing facilities such as changing the nominee and inheritance transfer. This is where IFAs have an advantage,” Patel added.
Mukesh Kalra, CEO, ETMONEY said that investment apps have managed to provide access to a large number of retail investors across India, as they are cost effective and easy to use.
He added that new SIPs through direct plans as a percentage of total new SIPs is a good indicator of the rate of growth of direct plans.
The latest AMFI data shows, the contribution of direct plan SIPs to the overall SIP AUM of the MF industry has increased to 14%, for SIPs being held for less than a year. Direct plan SIPs was just 5% of the total SIP AUM if we look at SIP assets, which are in the industry for five years and more.
Suresh Sadgopan, Founder of Ladder7 Financial Advisories, feels that though the pace of increase in HNIs’ investment through direct plan is heartening, the number could have been slightly higher. He added that even now many investors do not know about the direct plans.
Total assets of the MF industry that came from direct plans rose to 41% in June 2019 from 40.6% a year ago. A large proportion of direct investments were in non-equity oriented schemes where institutional investors dominate.
