Direct vs Regular Plans.

Investors are becoming more aware of Mutual Fund Direct Plans. Investment into Mutual Funds (MFs) can be done in two ways:-

Regular Plans whereby a certain ‘expense ratio’ is charged by the mutual fund company ( ie, the AMC – Asset Management Company), as a percentage of the value of your fund, which includes the fee of the AMC as also some fee of the Adviser who is managing your portfolio. Thus, it is a bundled option. The fee of the Advisor is directly credited by the AMC to the Advisor after it has been charged to you. So, the expenses charged to you are of AMC + of the Advisor.

Direct Plans where the AMC deducts only its own expenses and nothing is given to the Advisor. Thus, Direct Plan is like investing directly with the AMC. In such a case, if you are using the expertise and services of an Advisor, you would be charged a fee by your Advisor which will need to be paid directly to the Advisor. So, the expenses charged to you are of AMC only.

What is better for you – Regular Plan or the new Direct Plan?

As far as we are concerned about regular plan, distributers are the agent of the AMCs and their focus are on the AMCs whose give them better fees. In case of direct plan, the SEBI RIAs (Registered Investment Advisers) are the agent of the client, and their process of scheme selection is totally unbiased. In Regular Plan the fees are inbuilt with the expenses ratio and expenses ratio remain the same irrespective the volume of investment. In Direct Plan the fee is charged to client directly and the %of fee is reduced when the volume of investment is increased.

How will you be charging the fee, in the Direct Plan?

We will be getting a Debit Mandate signed by you, which will give MFU (Our Platform for Direct Mutual Fund transactions) the authority to collect the fee  directly from your Bank Account instead of routing it through the AMCs.

What is the difference between Direct Plans offered by you & the service available through Apps like ET Money and Paytm which do not charge any fees on Direct Plans?

The main difference is -There will be NO Advice, Monitoring, Reviews or Hand-holding being done there for you. They are simply robotic investment firms (called Robo-Advisories) which is akin to going to a chemist, bypassing the Doctor, for getting medicines for your serious ailment after researching it on the internet. Also, as it is famously said, If you’re not paying for the product, you are the product! Be prepared to be bombarded with offers of insurance and cross-selling of other sub-optimal products over a period of time, as happened in the developed countries.

What will be the services given by you to me if I go in for the Direct Plan?

There will be just no difference in services for our Direct Plan subscribers – they will be the same as was being provided by us to our subscribers in the Regular Plans like Risk Profiling, Complete MF Portfolio and other Investment Reviews, Investment Planning & regular quarterly portfolio reviews.

We become your 360-degree Financial Advisors rather than merely an Investment Advisor. Of course, our famed ‘Financial Plan’ preparation option is always available to you any time for you too on payment of its separate requisite fee.

What if I just take your advice and do my investments myself?

Yes, we have that model also available for you. In that, we will do your Risk analysis, a two-hour discussion on your goals and suitability of your portfolio for you – this discussion could be done personally in our office or on phone, review your current MF portfolio, and suggest a suitable portfolio for you. Other services, as mentioned in the previous Question, will not be available though. You can go in for reviews by us at an extra cost..

What do I need to do if I already have my investments through you in the Regular Plan?

If you wish to shift your regular plan portfolio to Direct plan, please remember that It is considered as a sale of Regular mode funds and purchase of Direct mode funds, whether those funds are being managed by us or by anybody else. There could be taxation and/or exit loads that may be applicable. You need to connect with us, and we will work out a schedule for this shifting in a phased manner over a period of time so that taxation and exit loads are minimized or eliminated.

What fees do you charge for investments through you in Direct Plans?

The fee will be charged by us on a quarterly basis, based on the total value of your MF assets being managed by us, directly from your bank account, once you have approved of our charge structure. It will annually range from 1 % to 0.5 % of the investment value, percentage fees reducing as your investments increases.

Source: Network FP

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two comments
  • very good article

  • Useful information about financial planning

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