Investing in mutual funds has important life lessons to teach.

Like this one: Who would you rather buy a mutual fund from? An adviser who will charge you for her expertise, but will help make better returns in the long term, or from a distributor who doesn’t charge you a dime upfront, but shares with you a part of the commission she earns?

This, in essence, captures the dilemma and the lack of awareness among mutual fund investors. And it has got the Securities and Exchange Board of India (Sebi) rolling up its sleeves to make the process investor-friendly. The regulator thinks it is best if you to go to investment advisers to buy mutual funds over distributors. Because Registered Investment Advisers (RIAs) are in a position to give unbiased advice, as they make money only when investors pay them for it.

On 2 January, in the third and latest in its series of recommendations on investment advisers, Sebi effectively made the advisory business unsustainable by creating an uneven playing field.

Sebi said that distributors and advisers must be two completely different entities, entirely unrelated to each other. But it left a crack open. While saying distributors must not advise, it said they could still explain the features of the products sold. And advisers believe this is as good as any advice.

These changes will trigger a shift in the business models of many financial institutions including banks like SBI, HDFC, ICICI, Kotak, which both distribute and advise on investments. They will have to choose one of the two models before March 2019. It is a no-brainer that most may end up picking distributorships as they earn hundreds of crores in commissions.

It is at this time that payments company Paytm has announced that it is setting up an investment arm called Paytm Money. It wants to be an adviser and let people buy mutual funds for free. The mutual funds industry has taken a long time to get to 15 million investors. And Paytm’s existing scale could shake up the industry one way or the other. But more on that later.

Both the distributor and advisory lobby are sending suggestions flying back to Sebi, but a source with some knowledge on the matter said this consultation paper is the last in the series of rules regulating how mutual funds should be sold. “The rules are more or less set in stone now and the question is about the deadline of when these rules will truly be applicable,” says the executive director of a mutual fund house.

That only means the advisers have it coming.

Not enough wind beneath the wings

Sebi’s push towards the advisory model began in 2012. It said every mutual fund house should have two types of plans for every scheme it launches.

AUTHOR

Arundhati Ramanathan

Arundhati is Bengaluru-based. She is interested in how people use money in the digital age and how new economies will take shape based on that interaction. She has spent over 10 years reporting and writing on various subjects. Previous stints were at Mint, Outlook Business and Reuters.

View Full Profile

Subscribe to read this story

The Ken is the only business subscription you need. Questions?

 

Premium

  • 5 original and reported longform business stories every week
  • Access to ONLY India edition
  • Close to 250 exclusive stories every year
  • Full access to over 5 years of paywalled stories
  • Pick up to 5 premium subscriber newsletters
  • 4 original and reported longform business stories each week
  • Access to ONLY Southeast Asia edition
  • Close to 200 exclusive stories every year
  • Full access to all paywalled stories since March 2020
  • Pick up to 5 premium subscriber newsletters

Rs. 2,750 /year

$ 120 /year

India Edition
Subscribe Subscribe
Most Asked For

Borderless

  • 8 original and reported longform business stories each week
  • Access to both India and Southeast Asia editions
  • Close to 400 exclusive stories every year
  • Full access to over 5 years of paywalled stories across India and Southeast Asia
  • Unlimited access to all premium subscriber newsletters
  • Visual Stories

Rs. 4,200 /year

Subscribe
 

Echelon

  • 8 original and reported longform business stories each week
  • Access to both India and Southeast Asia editions
  • Close to 400 exclusive stories every year
  • Full access to over 5 years of paywalled stories across India and Southeast Asia
  • Unlimited access to all premium subscriber newsletters
  • Visual Stories
  • Bonus annual gift subscription
  • Priority access to all new products and features

Rs. 8,474 /year

Subscribe
Or

Questions?

What kind of subscription plans do you offer?

We have three types of subscriptions
- Premium which gives you access to either the India or the Southeast Asia edition.
- Borderless which gives you complete access to The Ken across both editions
- Echelon which gives you complete access to The Ken across both editions along with a bonus gift subscription

What do I get if I subscribe?

The Premium edition gives you access to stories in that edition along with any five subscriber-only newsletters of your choice.

The Borderless and Echelon subscription gives you complete access to The Ken across editions and unlimited access to as many newsletters as you like.

What topics do you usually write about?

We publish sharp, original and reported stories on technology, business and healthcare. Our stories are forward-looking, analytical and directional — supported by data, visualisations and infographics. We use language and narrative that is accessible to even lay readers. And we optimise for quality over quantity, every single time.

Our specialised subscriber-only newsletters are written by our expert, award-winning journalists and cover a range of topics across finance, retail, clean energy, cryptocurrency, ed-tech and many more.

How many newsletters do you have?

We are constantly adding specialised subscriber-only newsletters all the time. All of these are written by our team of award-winning journalists on a specialised topic.

You can see the list of newsletters that we publish over here.

Does a Premium subscription to your Indian edition get me access to the Southeast Asia edition? Or vice-versa?

Afraid not. Each edition is separate with its own subscription plan. The India edition publishes stories focused on India. The Southeast Asia edition is focused on Southeast Asia. We may occasionally cross-publish stories from one edition to the other.

We recommend the Borderless or the Echelon Plan which will give you access to stories across both editions.

Do you have a mobile app?

Yes! We have a top-rated mobile app on both iOS and Android which allows you to read on-the-go and has some amazing features like the ability to bookmark stories, save on your device, dark mode, and much more. It’s really the best way to read The Ken.

Is there a free trial?

You can sign up for a free account to experience The Ken and understand our products better. We’ll send you some free stories and newsletters occasionally, and you can access our archive of previously published free stories. You can stay on the free account as long as you’d like.

The vast majority of our stories, articles and newsletters can be accessed only by a paid subscription.

Do you offer any discounts?

Sorry, no. Our journalism is funded completely by our subscribers. We believe that quality journalism comes at a price, and readers trust and pay us so that we can remain independent.

Do you offer refunds?

No. We allow you to sample our journalism for free before signing up, and after you do, we stand by its quality. But we do not offer refunds.

I am facing some trouble purchasing a subscription. What can I do?

Just write to us at [email protected] with details. We’ll help you out.

I have a few more questions. How can I reach out to you?

Sure. Just email us at [email protected] or follow us on Twitter.