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One of the biggest reasons for investors to postpone their mutual fund purchase is the paperwork involved in account opening and fulfilling Know Your Customer (KYC) norm. Online mutual fund platforms are therefore trying to tap these customers by either minimising the paperwork or making it completely online. Rahul Parikh, who heads Aditya Birla Money MyUniverse, says over 50 per cent of the customers who sign up with the online fund platform do not have KYC.
ICICI Direct has recently launched an online service that lets a person open a mutual fund investment account online. All that an individual needs to do is to log on to the company's website, and click on 'Open Insta Account'. If he is KYC compliant, he can quickly verify credentials; enrol for electronic clearing service (ECS) by scanning and uploading a cheque, and then start buying mutual funds once ICICI Direct process the request. If an investor doesn't have a KYC, the company sends an executive to the individual's place to complete the formalities.
But ICICI Direct is not the only one cutting down on the paperwork for mutual fund investments. Aditya Birla MyUnivere, FundsIndia.com, and Association of Mutual Funds of India's MF Utility have gone one step further. MyUniverse and FundsIndia.com, for example, let customers scan and upload all documents online. Then, they verify applicant's credentials over video conferencing. "The only paperwork involved in account opening is sending physical document for ECS that let us provide a systematic investment plan (SIP) for investors by debiting their bank account at regular intervals," says Srikanth Meenakshi, co-founder and COO, FundsIndia.com.
To make the mutual fund investment process convenient and faster, the online platforms have been adding more and more features to their offerings.
At fingertip
A majority of new investors is using the online fund platforms to buy and sell mutual funds, say industry players. They are spoilt for choice, too. Every fund house now lets investors buy and sell schemes on their respective websites. But the drawback here is that customers needs to keep track of each investment individually. Anyone who owns a demat account can also use his trading account to do investments, which become more convenient. The Bombay Stock Exchange and National Stock Exchange have their own platforms too, but they are more focussed on distributors and their members than retail customers. If you own a net banking account, you can again transact in mutual funds through your respective banks. Then there are service providers, such as Fundsupermart.co.in, that give a platform to distributors. But there are also standalone online service providers that focus on online mutual fund platform for retail customers. These include FundsIndia.com, Aditya Birla MyUniverse, MF Utility, and ICICI Direct.
These platforms let investors carry out all kinds of transactions that they would do offline. Other than just investing in mutual funds either in lump sum or via SIP, a person can also mandate these companies to systematically transfer money from one fund to the other. Say, a fixed amount from a liquid fund to an equity fund, and even vice versa.
Some such as FundsIndia.com also offer additional option such as step-up SIP. This tool allows investors to gradually increase their contribution towards a particular financial goal. This can be quarterly, half-yearly or yearly. The company's client can also go for value-averaging investment plan (VIP). In this, the monthly contribution to mutual fund is flexible depending on the market condition. Whenever the market corrects, investors put in more money to buy more at lower levels. When markets rise, the investment amount is lower. Many believe that over the long term, investors can make better returns in VIP compared to SIP.
Online services
The platforms also have their research in place to help customer take informed decisions though each one may do it differently. One of the tools, ZIPSIP, at MyUniverse, profiles investors by asking them few questions. It then, recommends three funds in each category that they can invest in to build their portfolio. ICICI Direct too comes up with a limited list of recommended funds but also provides ratings of schemes from an independent body. It also shows customers funds that have received maximum investment in the current month to let the person see what others are buying. "This lets the user decide based on our research, independent rating and others' preference," says Vineet Arora, head of product distribution at ICICI Securities.
All of these platforms also do risk assessment of customers. The recommendations can be tailored to their profile and/or goals. If someone is still confused, some such as MyUniverse, also have the facility whereby investor can call up an advisor to take suggestions.
Offline services
A person who holds older mutual fund investments that were not purchased online can also request these companies to make the investments online. For this, he will need to fill up a request form for change of distributor. Say, you had invested in funds through your bank and now want to join one of these online platforms. Until now, the bank was your distributor and has been earning commissions on your investments. Post transfer, the online platforms will be your new distributors.
Once you come on board, these providers also carry out services such as adding secondary bank account, which would require you to sign documents and courier them. If your bank account has turned dormant, these platforms can de-link it to your investments and help add a new one. These services are also offered free of costs.
Bells and whistles
The key to their business of an online platform is convenience and speed. You can view consolidated portfolio at the click of a button. Some keep a separate account for each family member. FundsIndia.com lets such people look at the investments of all the members in one page rather than going to each account and finding out the investment performance. These service providers also have mobile apps, especially for
Android operating system, that lets users monitor their investments on phone.
Charges
As mutual funds platforms are still evolving, all services are free of charge. These companies earn commission from your investments.
Online platforms offer bouquet of services depending on the need of the customer. They are evolving to be one-stop shop for all your mutual fund needs. But it's necessary that you do your own research. They are also not a replacement for a financial advisor, whose fees might look expensive but work out to be much cheaper over the long term.
