Cover Story
fair in a bid to shore up AUMs
(assets under management) and
have themselves to blame for the
lack of trust among investors.
While direct plans are available
to investors and many are even
choosing that route, investors
need to keep in mind that a high
rating does not guarantee long-
term performance. Typically,
most investors look at a fund’s
performance over a shorter duration
and then invest. This can lead to
problems, claim many distributors.
Says Jimmy Patel, CEO of Quantum
AMC: “Retail investors are seen
relying on information available in
the public domain like the ratings
and rankings to invest via the direct
route. There is a higher likelihood
of an investor investing without
completely understanding the
requirements. This has happened in
developed markets, where investors
invested via direct route, banking
on information they could get their
hands on or just mere hearsay.”
Investing directly comes with a
caveat, “Buyer Beware.”
Despite this shift in consumer
behaviour, many still believe
Deepak Mittal
MD & CEO, Edelweiss Tokio
Life Insurance
Distribution is not open
in the physical world
as it is in the digital
world. Achieving scale
in the digital world is
easier and, therefore,
growing market
share too is easier
and faster in the
digital space
that the consumer needs advice
before investing and, therefore,
the distributors, digital platforms
and direct channels (AMCs and
independent platforms hawking
direct plans) will co-exist. Kumar of
Scripbox believes that consumers
are willing to trust digital platforms
because they want assistance, even
if they invest through a technology
platform. The online investment
platform helps investors select
funds using algorithms and even
helps the investor move out of the
mutual fund schemes if they are
not delivering good returns
after one year.
Given that no two funds perform
alike in different market cycles,
choosing the right fund becomes
very important. Choosing a wrong
fund can seriously impair wealth
creation goals. The high net worth
individuals are no longer willing to
pay 2.5 per cent in commissions,
claim distributors. For instance,
direct investment platform Unovest
has a small investor base of 3,500
but has helped investors invest
`400 crore through its platform.
Motilal Oswal Asset Management’s
Somaiyaa believes that if everything
goes direct, then new models
will need to evolve. Over time,
regulators could consider variable
charges for different share classes.
For instance, in the US, the expense
ratios depend on the size of
investments made. A small-ticket
transaction can attract
Online Vs Offline Ulip Charges
Online Plan
Plan Name SBI Life-
eWealth
Premium
Allocation
Charge Nil
Offline Plan
Edelweiss
HDFC
Tokio
Click2Invest
Wealth Plus
Nil
Tata AIA- Fortune
Pro
Kotak Life- Wealth ICICI Prudential-
Insurance
LifeTime Classic
Nil *6% for 1-2 yr, 5.5% for
*9% for 1st yr, 7.75% for
3-5 yr, 4.5% for 6-7 yr,
2nd, 6% for 3-5 yr and
3.5% for 8-10yr and 2.0%
3% 6th yr onwards
11th yr onwards
0.20% p.m. for pre-
0.095% p.m. of
mium up to `1,99,999, annual premium for
0.75% p.a. of annualised
0.10% p.m. for `2 lakh PT 1-5 yr, 0.20% p.m.
premium, subject to a
to `3,99,999 and Nil for 6th yr onwards, sub-
maximum of `6,000 p.a.
`4 lakh & above, starts ject to a maximum of
from 6th yr onwards
`6,000 p.a.
*6% for 1-5 yr, 4%
for 6-7 yr and 2.0%
8th yr onwards
Admin Charge `45 p.m. Nil Nil Fund
Management
Charges 0.25% - 1.35%
p.a. 1.25% - 1.35%
p.a. 1.35% p.a. 0.65% - 1.20% p.a. 0.60% - 1.35% p.a. 0.75% - 1.35% p.a.
Overall Cost of
the Product 1.52% 1.50% 1.77% 2.18% 3.02% 2.13%
Source: www.policybazaar.com ; The charge is % of premium ; For a 30-year-old paying a `1 lakh premium; policy tenure of 15 years
54
Outlook Money February 2018 www.outlookmoney.com