Following the decision of the Securities Exchange Board of India’s (SEBI) to abolish the entry load on Mutual Funds, most financial advisors are feeling the crunch due to the non availability of incentives from the customers’ end. Earlier, financial advisors used to earn a minimum of Rs 50 as a fee from investors who wished to invest a minimum of Rs10000 in an equity fund. But if the investor chose to invest in a Liquid Fund, Short term Fund or Fixed Maturity Plan (FMP), he is entitled to pay an even lesser fee. Investing your savings has a certain amount of manpower costs to be incurred by your agents and with the cut off in the commission; advisors are finding it very difficult to provide services for investors.
Although the decision of investing may be a simple one, but there is lot of paperwork and a series of transactions involved to facilitate the successful completion of one transaction. For instance, an advisor meets a prospective investor, at his work place or home, explains the products and services available and discusses the pros and cons of each fund. Various forms are filled up and are submitted to the registrar. Practically thinking, Rs 50 as a fee is too less to compensate for the amount of expenses involved. For this reason many independent financial advisors (IFAs) reduced the sale of Mutual Funds physically and have opted to sell insurance policies instead.
This move, although has reduced the role of Financial Advisors, it has increased the demand of investors to opt for the online portal for transacting their Mutual Funds. With this the entire process of physical completion of paperwork and wastage of your amount in the form of commission is done away.
Advantages of investing online:
- Unlike the physical world of filling up forms and commuting to places to get them registered or writing up cheques, all you are required to fill is the Know Your Customer Norms (KYC). Therefore, the online mode enables you to transact without any paperwork irrespective of your physical location.
- Transactions for your Systematic Investment Plan (SIP), is just one mouse click away. You can choose to alter your investment requirement as per your choice. Also, you need not worry about your account statements. Each time you log in, the value of your investments will be available, updated. Unlike the regular pile up of your investments on paper which can leave you clueless, the online facility provides you easy access to your investments.
- Most online services provide you with informative facilities like in house research, which will keep a track of the mutual funds performance on a daily basis. The in house research teams also keep meeting up with the fund managers to get their views on the markets’ performance.
- Online calculators give you the solutions as to how much you should invest in order to meet your financial requirements and goals. Most of these websites provide investors with various allocation models that help you to construct your portfolio based on your age and risk appetite.
- Investors have the benefit of investing in various Mutual Funds across different AMCs from only one platform and also help in keeping a track of your portfolio performance.
Apart from all these advantages, you need to bear an important fact in mind which is – being cautious while choosing your desired Mutual Fund. Do not blindly heed to the advice of your advisors or make any hasty decisions. You do not want to end up borrowing a home loan or a personal loan to fulfill any of your goals. Getting into such debt can create a mess in your financial stability. Be wise, and choose only after evaluating all the pros and cons of each fund.