“The regulation clearly says that direct plans are for the transactions that are not routed through a distributor and thus, capturing the distributor code on such transactions would mean that the transaction is routed through that distributor. Therefore, ARN code cannot be captured on transactions received in direct plans.
However, any distributor is allowed to advice the direct plans for a fee and there is no restriction there”, says V Ramesh, Dy Chief Executive, AMFI.
So why are the industry players upset then?
This is because without the data feed from AMCs, investment advisors won’t be able to service their clients (ie generating their portfolio, alert the client when the investment reaches a specific value or worth redeeming, etc).
The other option – ie clients forwarding the investment details and the advisor feeding these details manually – is a costly affair. Further, this manual data entry may also increase the chance of errors. Because of this, most advisors aver that the very purpose of direct plans – ie allowing the investment advisors to offer direct plans to their client for a fee – is defeated by this action.
“It will be difficult to offer direct plans and continue to service clients unless the reverse feeds are allowed. We are hopeful that AMFI will remove this restrictive clause soon”, says A V Srikanth, CEO, Motilal Oswal Wealth Management.
Some section of the fund management industry also feels that the spirit of direct plan is getting defeated by putting this extra condition by AMFI. They say that the purpose of direct plan is to reduce the cost to the investor (ie by removing the marketing/distribution costs) and not to stop the advisor from servicing his clients.
“Sebi’s intention of asking Mutual Funds to create a direct plan is clear –direct plans should be without commission, since the investor approaches the fund house directly and not through an intermediary, but somehow this has been interpreted that it must be without the advisor. Direct plans are another avenue provided by SEBI, which an investor can avail of to invest in Mutual Funds and is not intended to replace the existing distributor model. While we will not be paying any commission, we will continue to support the advisors for their MIS requirements”, says Patel.
Read More News on
- For mutual fund industry, it's back to basics
- View: Mutual fund industry should choose between corporate and retail money
- Mutual fund industry folio count rises 9% in FY20 on robust performance
- ETMONEY corners 28% market share of mutual fund industry's net equity flows in June 2020
- 'Budget proposals on DDT, personal tax not to impact mutual fund industry'
- Mutual fund industry witnesses outflows worth Rs 2.13 lakh crore in March
5 Comments on this Story
Praful Datkhile2778 days ago
Amit Agrawal2808 days ago
Sanjay Gupta2813 days ago
I think the situation is being unnecessarily complicated. First they tried doing away with commissions on investment, and then this. I cannot see how two streams Direct and through an advisor will survive long term..