Recently SEBI has brought some regulatory changes in mutual fund where one if within the same scheme there will be direct plan with lesser expense ratio and lesser NAV and other will be normal plan with slightly higher NAV as it has brokerage expenses also included  . It raises the question what should be the right approach for both advisor and investor ?

First we have to understand this change brings different implication for different stakeholders in Mutual Fund Industry.

SEBI intention is to improve this business better both on qualitative side ( better advice , better product deliverables ) and quantitative side ( lesser cost ) . AMCs as manufacturers have the role to offer better products with better deliverables ( returns to investors )  . Advisors as the name itself signifies are suppose to offer good investment advice for the best interest of the client .

So if acted in total spirit of intention of this regulatory change industry is bound to gain . Coming back to investor what he should be doing – going direct or through advisor ? To me the question is not cost reduction but what value one is getting at what cost ? Client need to understand that by bringing direct plan does the role of advisor goes off ? Definitely not but in fact it becomes more relevant and necessary for client . How ?

Time is valued by most people in this world . Better and productive usage of time is key to success . In this fast moving world free time seems to get lesser day by day as apart from work hours , focus on health , mental well being through proper recreation , holidaying , networking, socialising etc are more on priority list.  Time being a big constraint how can any investor spend time to read , analyse various MF products , be updated on dynamic investment works , have a proper measure of various vagaries of risk etc . It looks easy but very cumbersome and only those can do who have interest and penchant to know and learn about the subject . Even if some one feel he can spend time on these then is it just to monitor own investment or due to real interest about subject .  Even if the investor is as knowledgeable and having updated awareness about product, performance etc still management of emotion ( greed and fear ), temptation to fall into trap, herd mentality , over reacting or underreacting to experience can not be ruled out and these things can be well managed with the association of an advisor with balanced frame of mind , unbiased approach and with mutual discussion and consultation they can take judicious decision .

People are working hard for better life , better livelihood , want to earn more and enjoy more . If earning money is important today growing and preserving growth of money is even more important and here comes the role of an Advisor . How one invest ( direct or through broker plan ) is  client decision but how well one invest is more important aspect . Investor have to understand that the role of advisor is not only at entry level but he is a guide to investor in the whole journey of investment .  One has seen the journey has not been smooth last 7-8 years but had its own highs and lows and so investor needs an advisor all the time to guide him, safeguard his interest and also ensure that his client reached his investment and financial goals well .

Even if a client decided to invest through direct plan but he should never leave the hand of his advisor who  has been providing good advice and service to him. With direct plan in place there could be effort for  allurement , temptation and also influencing on short term gain over long term benefit and it is here only that advisor will be of great help .

MF products are most dynamic in nature considering the valuation is market determined and some short term swings can make investor uncomfortable . The reasons of such uncomfortable movements needs to be well understood and communicated and it is here the experience , expertise and knowledge of advisors comes in place .   Not so knowledgeable and less aware investor may take wrong call if not seeking advisors advice .  The service provided by the advisor can not be undermined be it sharing desired and relevant information on timely basis , analysing investment portfolio , sharing reasons on performance variables , clearing doubts if any, executing documentation and depositing process at R & T end , assessing and communicating right investment avenues matching client suitability  etc etc .

The utility factor of an advisor has to be fairly and honestly evaluated by investor . Then he needs to ask just one question to himself – Do I really need him or not ? If answer is yes then he should continue his association .  Any service has to be judged in terms of value add it offers and if there is good value add then that service also has to be fairly priced to keep economic interest intact of service provider . In this case also based on mutually agreed economic interest of both entities the relationship will continue and flourish whether it is fee provided for the advice and services or in built in product pricing . My advise to investor will be never compromise on short term small benefit for long term big gains as human relationship is not just about money and cost but concern and care about each other well being and growth and not easy to price it as well .