Gone are the days when advisers would rush to R&T offices to submit client applications. Riding the digital wave, many advisers are enrolling with stock exchange platforms - BSE StAR MF and NSE NMF II to take their practice to the next level.
This is evident by the sharp jump in the transactions clocked by these platforms. For instance, NSE processed 27 lakh transactions last fiscal, up 238% from 8 lakh transactions in FY15-16. In terms of volumes, the exchange processed Rs 7,600 crore worth orders in FY15-16, which increased to Rs 16,563 crore worth orders in FY16-17. The number of SIP registrations too went up from 0.60 lakh to 2.33 lakh during the same period.
Its competitor BSE saw much higher jump in transactions. The exchange claims that its transactions went up from 33 lakh in FY 2015-16 to 65.50 lakh in FY 2016-17. In terms of value, the orders were worth Rs 75,000 crore in FY 16-17, up 70%, from Rs 44,000 crore in FY 15-16.
Here’s why distributors are going digital and how it is benefitting them. Mumbai based adviser Vinod Jain who manages assets worth Rs 600 crore has been using NSE NMFII platform for over two years. More than saving on time and eliminating paperwork, Vinod says that platforms like these are helping him scale up. “Platforms have broken the geographical boundaries. Thanks to the technology, we now have clients across India,” says Vinod.
Vinod has shifted 50% of his client transactions on NSE NMF II. His dream is to register 1000 SIP in a single day on this platform.
There are many functionalities which can be of great use for distributors. These platforms have been introducing many new features to make distributors experience seamless. Recently, both BSE and NSE have launched app version of their platforms, making it more convenient for advisers to punch in transactions on the go. NSE is in the process of launching client pre-& post sales tools and instant redemption facility.
One of the striking features of these platforms is that they allow distributors to execute bulk transactions, a task which is perhaps impossible to execute physically. This feature has been instrumental in helping investors get in and out of markets tactically. Many distributors are said to have used exchange platforms to channelize fresh investments in MFs on the day of Brexit announcement, when our markets saw a correction.
These platforms are evolving by keeping pace with changing regulations. Recently, both NSE and BSE have started a platform for RIAs which allows them to recommend direct plans.
Like any new technology, exchange platforms have their flipsides. For instance, distributors say that their clients sometimes don’t get the same day’s NAV since the money goes to the clearing corporation first and subsequently to AMC, increasing the transaction processing time. “The problem arises during purchases of high ticket applications. I think platforms are at a nascent stage and things will be resolved going ahead,” says Pune based adviser Amit Bivalkar who manages Rs 1,400 crore MF assets. Amit recommends that a direct credit to scheme account would help investors get the same day’s NAV. Also, he believes that doing away with or increasing the Rs. 50,000 per mutual fund per year cap of Aadhar based KYC investment will give a big boost to platforms.
Amit has moved 25% of his client transactions on NSE NMF II. He is actively encouraging his remaining clients to sign up for online account by apprising them of the benefits.
Besides helping advisers expand their geographical footprint, platforms have increased staff productivity. “You can see the status of your transaction in two hours and rectify the problem. If you transact physical, you get to know the status only next day. This has reduced the turnaround time and my staff is more efficient now,” observes Amit.
Besides metros, distributors from tier II cities are also actively using exchange platforms. Bharuch based adviser Pratik Shah has been using BSE StAR MF platform for the last six months. He has already enrolled 600 clients on BSE StAR MF of which 60 clients transact independently. For clients who are still learning the ropes, he has been transacting on their behalf by taking their approval through SMS or emails. Pratik says that 10% of his incremental transactions are now being done online. By going digital, Pratik says that his SIP book has increased from Rs 60 lakh to Rs 85 lakh ever since he started using StAR MF. As a result, his AUA has also increased from Rs 30 crore to Rs 45 crore during the same period.
While an increasing number of distributors are going online, some prefer status quo. One of the reasons for distributors reluctance to go online is their fear that clients would redeem at impulse or go direct once they are comfortable transacting online. But Amit has not come across such behavior among his clients. Another common concern among distributors is loss of identity. Exchanges claim to have solved this issue by providing Application Program Interface (API) service. This feature allows clients to complete a transaction on distributor’s website.
Exchange platforms opened to members/brokers from 2009 but they saw momentum only after they allowed MF distributors to take up limited membership for selling MFs, which requires less stringent compliance and net worth requirement as compared to brokers.
Exchanges are currently offering their services at no additional cost to distributors (besides the initial deposit and application processing fee). But the future may not be far away when they start charging either distributors or AMCs to use their services. One of the platforms had reportedly asked AMCs to cough up a transaction fee which was opposed by AMCs. Meanwhile, exchanges are doing all they can to woo distributors on their platforms to build their base.