Why investors should opt for MFCentral for direct MF transactions

MFCentral makes direct plan MF transactions more robust by eliminating the middleman and also significantly reduces the risk of mis-selling

The launch of MFCentral.com by CAMS and KFin Technologies (KFinTech), in phases over 2021–2022, was one of the most significant developments for Indian mutual fund (MF) investors in the last 10 years. For the first time, there was a single, user-friendly platform to invest in direct plans (ie zero-commission plans) of 100 per cent of MFs, without the risk of being pushed to buy other high-fee financial products or services. There are seven reasons why I recommend MFCentral to my clients.

 

First, Securities and Exchange Board of India (Sebi)-registered investment advisors (RIA) recommend direct plans of MFs because in regular plans (ie commission plans), investors end up paying an average commission of 0.8 per cent per annum to MF distributors (MFD). This is mathematically equivalent to the investor losing 21 per cent of the investment over 30 years. Avoiding this leakage is crucial. MFCentral enables investment in direct plans of MFs.

 

Second, MFCentral supports investments in Statement of Account (SoA) form — ie digital (not paper) form — but not in demat form. In demat form, the broker’s reputation becomes relevant. In SoA form, investors need not worry about this. Moreover, investors are free to invest from one platform and redeem via another. They are not tied to any one platform. It takes less than five minutes for Sebi Know Your Customer (KYC)-compliant existing investors in any MF to sign up on MFCentral and start purchasing MF units (such as Nifty 50 index fund – direct plan) from any fund house, or even redeem or switch existing MF units, including those held in regular plans. Currently, MFCentral allows only single-holder transactions by resident Indian individuals.

 

Third, it is convenient to have a unified platform for all direct plan MF investments. This eliminates the hassle of remembering multiple login credentials and learning the peculiarities of different platforms such as CAMS, KFinTech, or MF-specific websites.

 

Fourth, CAMS and KFinTech are the registrars for 100 per cent of Indian MFs. Using MFCentral eliminates the need for a middleman in your investment and redemption process. The presence of a middleman may cause technical glitches (even if they are rare) that require investor follow-up to resolve. This is my most important reason for preferring MFCentral.

 

Fifth, Sebi says that direct-plan MF platforms must not push other high-fee financial products or services. However, many for-profit direct plan MF platforms may find ways — directly or indirectly — to circumvent this. Sebi compelled CAMS and KFinTech to establish MFCentral in the interest of investors. Therefore, there is a significantly lower (though not zero) risk of circumvention of Sebi regulations through MFCentral. This is my second most important reason.

 

Sixth, as a newer platform, MFCentral is more user-friendly than legacy systems, including CAMS’ platform, which was previously my preferred choice. It allows investors to initiate MF investments, redemptions, and set up, stop, or pause Systematic Investment Plans (SIPs) with ease. This enables investors to: (a) redeem investments quickly during emergencies; (b) avoid wasting an RIA’s valuable time on simple tasks; (c) delay renewing their engagement with the RIA until there is something substantial to discuss; (d) easily switch to a different RIA; and (e) invest in direct plans of MFs while evaluating which RIA to work with.

 

Seventh, MFCentral is a free platform and is likely to remain free going forward.

 

While MFCentral is not without flaws, in my view it is the best direct plan MF platform available in India.

 

The writer is an hourly-fee financial planner and a Sebi RIA at Fiduciaries.in. He was a private-equity investor for 12 years