Information on anything and everything is available at our fingertips. In this age of information technology, we investors are blessed to access and gain knowledge about various mutual fund schemes, their returns, etc. And all this information can be accessed for free.
It is no different for those providing financial services, too. There would be a host of emails, messages, and websites hogging to provide information.
Many mutual fund distributors will be approaching you to solicit mutual fund investments into new and the existing mutual fund. Especially now, since the economy is returning from its recession and the markets are turning favorable for investments.
While most of the information sent to us is already there on the world wide web. We can easily check the information about a fund from the AMCs (Asset Management Company’s) website. Still, for some investors, it may be a valuable service.
These mailers and messages keep updating us on the new launches, returns of various schemes, their NAV (Net Asset Value), and many other advantages and disadvantages related to them. But is that all we need to know about investing?
Don’t you think it would be sensible to choose the Best Mutual Fund Distributor who can help manage your investments? What if all this information is only adding to your confusion?
What with the names changes of many mutual fund schemes and portfolio realignments, most investors get confused about what they should do with their mutual fund holdings.
It may make sense to work with a mutual fund distributor who can advise and guide you on your investment decisions.
Only returns are not enough basis to select the right mutual fund distributor. There are many other things you need to look for.
1. Qualification of the Mutual Fund Distributor
The Association of Mutual Funds in India (AMFI) makes it necessary that the individuals engaged in service of mutual fund advisory to have a certification issued by the National Institute of Securities Management (NISM).
But merely relying on the certification isn’t enough as you would need to search a bit more into the philosophy (attitude and rationalization) and research process which the mutual fund distributor and his team adopt while advising clients. Moreover, you need to make sure that the distributor is not an individual who peddles investments as side-business. Remember, acting on the advice offered by a mutual fund distributor who doesn’t hold the requisite knowledge, could spell disaster for your money and investments.
2. Expertise of the Mutual Fund Distributor
Check for the expertise of the mutual fund distributor and his team. Check how well qualified they are in terms of education and what kind of knowledge and experience they possess.
Also, look into whether the distributor has good knowledge of the whole variety of asset classes. Such as equity, debt, fixed income, gold, etc.
They should be able to understand and decipher how these asset classes would be affected by various domestic, international events, decisions or changes in trends related to oil prices interest rates, etc.
Understanding the mutual funds, identifying their suitability for you and your investment portfolio, balancing the asset allocation, and knowing how changes in assets will affect you require a high degree of expertise.
Therefore, you must check how skilled the distributor is and what kind of experience he or she possesses. The mutual fund should be able to identify products that will meet your life requirements as and when they are needed.
The mutual fund distributor you choose must be easily contactable. Whether by email, phone, or by meeting in person within a reasonable duration. It is important that the distributor, whom you have entrusted your money with, is accessible as and when you need him. The distributor or team should be able to clarify your doubts within a reasonable period.
Is this distributor able to execute the transactions for you well in time? Timing is of crucial importance in the world of investing in Best Mutual Funds and Stocks. The distributor should be able to execute your transactions within a short time. As quickly as possible.
All these things matter when your hard-earned money is involved.
4. Provide Complete Financial Solutions
We Indians do not like discussing our finances or financial status with all and sundry. Because we have been taught not to reveal our finances and investments with too many people. We have been taught to keep such things and details, confidential and under wraps.
So it would be preferable to find a distributor who is a one-stop solution for all our financial needs. An advisor who can understand and handle our investments better and with confidentiality. An unbiased one. One who would be able to offer us mutual fund products from all fund houses. Not just one or two fund houses.
5. Is the Distributor Asking Questions?
This is the one attribute that will tell you whether a mutual fund distributor is interested in only selling or is he/she really interested in understanding your requirements and needs. And then take the investment forward, accordingly.
Is he/she asking you questions to know better your financial needs, situations and goals? Or are you only being given details about the products to convince you to buy a product and not the solution which you actually are looking out for?
Without posing questions to you, how would anyone know for sure which particular plan is the most suitable for you? Whether you can take the risk of investing in Small-caps or should your investments be limited to debt Mutual Funds? Whether you have one or two Life and Health Insurances or not? These two are quintessential ones to have before we start with mutual fund investments. To secure our loved ones.
Not only helping the investors, but all this information also gathered from them and from other investors all over the country and submitted to the fund houses. With this data collected, the fund houses, as well as the government, are able to better understand the investor’s moods and inclinations. It also helps them bring up new policies and policy changes. Devise new strategies. Develop and come up with new and attractive plans.
6. Infrastructure and Value Added Services
Apart from assessing his qualifications and attitude towards clients, you also need to judge whether he has the right infrastructure set up. Would you be able to receive prudent advice continuously? Remember entering an investment is only a beginning. You want your investments to be monitored and tracked regularly. Change must be advised promptly if an investment has become redundant or non-performer.
Therefore, you should ideally be provided various tools and calculators for online tracking of your investments, as value addition.
Besides, the mutual fund distributor should be sending regular updates on your portfolio. What all changes may be made according to the changes in the market conditions and financial goals? What all new development has been made in the field of mutual funds? What new plans have come up? What new policies have been devised that will benefit you or vice versa?
7. What kind of After-Sales Support is Provided?
As stated earlier that entering into an investment is simply a starting point. Only with the help of a prudent and reliable after-sale support, we would be able to monitor, track and further our investment portfolio. All the tracking tools may not be so easily understandable by every investor.
The reason for investing with a mutual fund distributor and not investing in Direct Mutual Funds is because we are not familiar and comfortable with the market. All the reports that are sent periodically by the fund houses to the investors are too full of jargons which we don’t understand always. To interpret them, we require the help of professionals. This help must be provided by the mutual fund distributor.
As and when you need it. Not as and when it is convenient with them.
8. Past Track Record
Well, if you are offered this, you would be able to gauge the quality of the advice. You need to cross-check the data provided by him/her with some of his clients as a reference check. The best way is to ask around for referrals.
Use social media, to know if anyone has recommended the advisor or his firm. Check online for any referrals, ask your friends or relatives, if they know of any references. What kind of knowledge and experience is associated? This way you can have an idea about his/her strengths and weaknesses.
Inspect for how long the advisor has been in business and his way of operating. Search for what field the mutual fund distributor was working in and what knowledge he/she and the team have. Someone who has gone through multiple market cycles would be experienced and, hence, preferred.
This exercise would not only help you understand his past performance track record but also help recognize whether prompt and reliable after-sales service is provided or not.
There is no formal rating or ranking system for mutual fund distributors in India, for now. So we have to work it out on our own.
A mutual fund distributor is in this business to earn. Whether it is an individual, partnership or a company, it wouldn’t be able to survive for long if it doesn’t get compensated.
Maintaining a website, helping you make a financial plan, gathering data on your behalf, keeping it free for you, and keeping all these services alive requires effort and money.
Many financial planners and advisors could charge a fee for the same. To write out a comprehensive financial plan, taking into account risk appetite, future requirements, and life goals. You are asked to pay them a fee, regularly. It is just that they don’t tell you about is that they get a commission, as well, on all the investments they make on your behalf.
Whether a mutual fund distributor is being honest with you or not, this is the crucial criterion to check for.
Today with so many options available to invest in, the task of doing prudent investment planning has become quite difficult. Because we are surrounded by so much information about each of these options, such as stocks, mutual funds, bank FDs, NCDs, corporate bonds, Public Provident Funds (PPF), National Savings Certificate (NSC), etc.
And, still, at the end of all the searching and evaluating, we keep wondering whether we made the right investment decision.
For us to be able to remove this chaos caused by “information overload”, what is required is getting hold of a mutual fund distributor who provides independent and unbiased financial advice. With no vested interests (of commissions). The one who would help, assist and guide you through prudent investment planning.
This is what the best Mutual Fund Distributor will do for you. This is what the vision and objective of WealthBucket are.