Urban MF investors go online

After the entry load ban, distributors are increasingly using technology to expand.

With 80 per cent of mutual fund (MF) investors hailing from the country’s top 10 cities, online applications are catching on in a big way. According to distributors, the volume of online applications has increased significantly after the ban on entry load.

“Our volumes have surged 45-50 per cent after the entry load ban. We have been registering a month-on-month increase. It is not only convenient but also transparent. The cost structure is also minimal. Apart from trading, we also offer research and latest industry statistics. Fund houses are showing a lot of interest in promoting the online medium”, said Vinit Arora, head of distribution at ICICI Direct.

ICICI Direct recently announced a new cost structure for MF investors. It introduced a nominal fee of Rs 30 for systematic investment plans (SIPs) and Rs 100 for investments below Rs 8 lakh. If the cumulative MF holding with ICICI Direct is more than Rs 8 lakh, the investor does not have to pay any commission.

Kotak Securities has registered a 25-30 per cent rise in online applications. “There is a mindset shift towards online. In the next two-three years, we plan to target Tier-III towns, which will be a major driver of volumes. The difference in cost of transaction in an online model and a relationship-based model is pretty large. Also, there is convenience in terms of purchase and redemption. Although BSE and NSE have launched systems for mutual fund transactions, the number of AMCs (asset management companies) on their platforms is limited, which limits the kind of transactions”, said B Gopkumar, head of Distribution at Kotak Securities.

It is not just third-party online platforms. Market players say online applications through MF websites have also been increasing. “Though not a significant proportion, these have certainly seen a lot of interest from investors. We are going to add new features to our online application system”, said the marketing head of an MF. Birla Sun Life MF recently launched an internet-based systematic investment plan (i-sip).

Jaideep Bhattacharya, chief marketing officer, UTI Mutual Fund, said, “We have seen an upward trend in the number of applications through online platforms. It makes sense for distributors as well as investors because it increases efficiency and helps in cost reduction.”

Post the entry load ban, fund houses and distributors are increasingly using technology to expand. In physical application, customers need to pay a negotiated advisory fee to distributors. On the online platform, distribution houses charge a nominal fee.

Sharekhan, another distributor active in the retail space, has witnessed a surge of close to 100 per cent in the number of investors applying online in the past two-three months. Maju Nair, head of distribution at Sharekhan, said: “The main reason we have seen an increase is that we are not charging anything from those who apply online. Besides, they get the ease of seeing their entire portfolio in one place and the benefit of our in-house research. However, Tier-III towns are yet to catch up in a big way.”