Investing in Indian Mutual Funds is not easy - presently there are more than
40 AMCs (Asset Management Companies) offering more than
11,800 schemes to investors. These are grouped into more than
25 different categories
ranging from Debt to Equity and everything in between. Each scheme has
two plans and anywhere from
four to ten different dividend payment options.
As perplexing as this situation is on its own, what complicates it further is that Mutual Funds in India are sold primarily by distributors, who are paid a commission by the AMC
for their services. The commission structure of the AMC is not disclosed to investors, who are therefore led to believe that they are gettting free service from the distributor,
whereas in reality the distributor may have sold them a scheme that pays them the highest commission! This system of AMC paybacks in the form of commissions creates a natural conflict of interest for distributors.
Our
Fee-only Mutual Fund Advisory service offering is designed to rectify and simplify this situation.
We are a
SEBI Registered Investment Adviser (RIA) and
operate in fee-only mode as required by SEBI regulations. This means that we charge investors directly for services rendered
and are not compensated by any AMC in any manner whatsover for our services.
Consequently we always have the best interests of the client in our mind. Unfortunately the financial services industry has historically operated in a "product sales" mode via distributors rather than in a "client centric" mode via RIAs.
It is only in the last few years that the fee-only advisory model is becoming popular in India as investors are becoming more aware and beginning to realize the many advantages of paying directly for investment advice.
Of late some portals have appeared that promise to deliver free online advice to investors for investing in Mutual Funds. However such portals make money by selling their Customers vital information to third party
marketers. Investors should be cautious about such services lest their private data is publicly compromised. Privacy of client data is assured with RIAs.
Advisory Fee structure
| Package | Minimum Corpus | Fee Percentage | Validity |
MFEQ-STARTER |
Rs. 25 Lacs
| 0.5% of corpus |
12 months
|
| MFEQ-REGULAR |
Rs. 50 Lacs
| 0.45% of corpus |
12 months
|
| MFEQ-PREMIUM |
Rs. 150 Lacs
| 0.4% of corpus |
12 months
|
| MFEQ-HNI |
Rs. 500 Lacs
| 0.35% of corpus |
12 months
|
| MFEQ-SUPERHNI |
Rs. 2,000 Lacs
| 0.3% of corpus |
12 months
|
MFDT-STARTER |
Rs. 25 Lacs
| 0.25% of corpus |
12 months
|
MFST-REGULAR |
Rs. 50 Lacs
| 0.225% of corpus |
12 months
|
| MFST-PREMIUM |
Rs. 150 Lacs
| 0.2% of corpus |
12 months
|
| MFDT-HNI |
Rs. 500 Lacs
| 0.175% of corpus |
12 months
|
| MFDT-SUPERHNI |
Rs. 2,000 Lacs
| 0.15% of corpus |
12 months
|
GST @18% will be additional. Packages struck out above are not available anymore.
Are we justified in charging a percentage of Corpus as Advisory Fee?
Consider the following table. It gives a comparison of the average expense ratio of direct and regular plans of mutual funds
across different fund categories and AMCs.
| Fund Category | Regular Plan average expense | Direct Plan average expense | Savings in Direct plan |
| EQUITY | 2.02% | 1.22% | 0.8% |
| HYBRID | 1.96% | 0.98% | 0.98% |
| DEBT | 0.9% | 0.42% | 0.48% |
| Average Savings in Direct Plans | 0.75% |
| Source: Value Research Online |
What this table is telling you is that when you buy Mutual Funds from a distributor, they sell you Regular Plans where you end up paying higher expense ratios to the tune of 0.75% of corpus
on average. What is worse is that this fee is deducted from the NAV by the AMC without your knowledge, giving you the impression that you got a free service from the
distributor. Plus this fee is annual - the distributor keeps getting paid every year as long as you stay invested in the fund. This cozy relationship between the AMC and the distributor
is clearly not transparent, but ask yourself - is it even fair?
On the other hand, as a SEBI RIA, we recommend only Direct plans to you and charge you a fraction of the savings as a one-time fee to compensate us fairly for our efforts.
Our fee structure is published above and hence it is transparent. The result is a win-win sitaution - you get unbiased advice tailored to your risk profile and financial goals and we get paid by you directly for our
services. Moreover we remain accountable to you during the entire service period. That is fairness and transparency combined.