SEBI chief U K Sinha expressed his displeasure over AMCs for not promoting direct plans. He was responding to a question posed by a distributor on direct plans at an event held in Mumbai yesterday.
“My complaint with the mutual fund industry is that because they are so much in the ‘clutches’ of distributors they are not actively promoting direct plans. Frustrated with this development, SEBI has created a committee headed by Nandan Nilekani which is trying to find out how best to use technology to provide swift and easy transactions. If consumers can buy all sorts of goods using mobile phones, why should they not be able to buy mutual fund products if they are aware?,” said Sinha.
However, fund officials and distributors have a different view. “Retail investors should invest in mutual funds with the help of distributors. You can go direct only when you know what you want. Investors are not aware of what they want. The value of distributor’s advice is more than somebody saving 50-70 basis points in direct plans,” said Sundeep Sikka, President and CEO, Reliance Capital Asset Management in a panel discussion at the event.
“If an investor has a bad experience on e-commerce websites, chances are that she will never invest in mutual funds. Investors can’t make an informed decision, especially when it comes to buying funds, without distributor’s advice,” said a Mumbai based advisor wishing anonymity.
Though direct plans account for 34% or Rs. 4.34 lakh crore of the total Rs. 12.64 lakh crore industry AUM as on June 201, the share of retail investors in direct plans is quite low. Retail assets in direct plans stood at Rs. 24,326 crore (across all scheme categories) in June 2015.
Corporates and banks account for a major share of direct assets, particularly debt funds. Of the Rs. 4.34 lakh crore total direct plan AUM, corporates had invested Rs. 2.81 lakh crore in debt schemes while banks had invested Rs. 52,371 crore.
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