The EU wants Britain to get its act together

The European Commission wants the Labour government to outline further spending cuts and spell out where the axe will fall on UK’s deficit, which is reaching for the stratosphere.

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    US & UK move closer to a downgrade of their credit ratings

    A top ratings agency has said that the US and the UK have moved “substantially” closer to losing their AAA credit ratings as the cost of servicing their debt have been rising.

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    IFAs accuse brokers of eyeing trail commission through MF dematerialisation

    IFAs allege that the investor is unaware of the change of broker and claim that the ARN number changes after dematerialisation of MF units

    As the assets under management (AUM) transfer business is gaining prominence, an increasing number of mutual fund (MF) distributors are questioning the authenticity of maintaining MF units in dematerialised (demat) form which ultimately leads to change of broker. Independent financial advisors (IFAs) allege that some brokerage firms change the AMFI registration number (ARN) keeping the investor in the dark, due to which IFAs stand to lose the trail commission.
    “I highly doubt it. Most of the share brokers don’t have enough knowledge about mutual funds. It’s just another business where they want to expand. Some gullible investors don’t come to know about change of broker unlike high net-worth individuals (HNIs),” said a distributor.

    To dematerialise an existing MF scheme, an investor has to open a demat account which is mandatory. Then he needs to attach all physical statements along with the conversion request form and submit it to Karvy, Computer Age Management Services Pvt Ltd (CAMS) or the asset management company (AMC).

    “There are no charges for demat account opening. We would be charging not more than Rs300 per year. There is no brokerage for mutual funds. The ARN number would be the same. Your distributor would change only if you want to,” said the official in charge of the process from Nirmal Bang Securities Pvt Ltd, a brokerage firm.

    “The ARN number does change. They never say that it’s a change of broker. Sharekhan has a form for the same which changes non-Sharekhan portfolios to Sharekhan folios,” said an IFA.

    Nirmal Bang Securities is providing a free demat account. But the online investing platform for MFs increases the cost for the investor, considering the brokerage, account-opening and maintenance charges. Moneylife had earlier reported on how dematerialisation would be a costly option for investors. However, one advantage is that it can do away with the unnecessary paperwork (see here).
    Although the demat form of Nirmal Bang nowhere mentions the change of ARN, MF distributors feel otherwise.

    “The conversion request form is enough to change the ARN number,” said a Certified Financial Planner (CFP).

    An official from a leading fund house says that the ARN number does not change, unless it is approved by the investor.

    “There were some vacancies in Nirmal Bang Securities for its mutual funds division but nobody was ready to join them because of the brokerage image. They hire some people for six months and if the project doesn’t takes off, they sack them. Some time back, Reliance Money and Edelweiss MF also sacked people. This is all being done for trail commission,” adds the IFA.
     

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    COMMENTS

    V K Ganatra

    9 years ago

    Most of the investor are unaware that there are no demat a/c opening charges but they will have to pay annual maintainence charges which is Rs.75 to Rs.150 per quarter and banks's s charge much more.
    with each debit credit there is charge of 0.04% or Rs.35 to Rs.50 per trancsaction.
    If i use just my a/c statement to transact - i don;t have to pay any charges. and mutua fund statements are sent freee of charge by mutual fund co.whreeas DP charges Rs.50 for in between statements

    Santhana

    10 years ago

    SEBI had opened a pandora box and does not know how to close it. When they jumped to rid the financial world of IFAs, why they have kept silent about the trail fee. Does it accrue to the person who canvased for the investment or the Big guy (Brokers and Banks) who grabs the account on the sly?

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