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Last week, the BSE exchange relaunched its mutual fund trading platform, BSE STAR MF Distribution Platform. This was first launched in 2009.
The older version allowed only registered stock brokers to transact; the new version also allows independent financial advisors (IFAs) to do so. Earlier, money and fund units first went to the broker's account and then to the fund house. Now, the IFAs will only facilitate transactions. The units and the money will move from the investor's account to the stock exchange and then to the fund house.
But you will need a demat account to be able to buy fund units on this platform. "Investors have a choice of holding units either in physical form or in demat. However, for convenience ofoperations and ease of entry and exit, it would be advisable to hold the units in demat form," says the BSE website.
You start with the know-your-client (KYC) registration -- sen the demat account number, bank account number, Permanent Account Number (PAN), phone number and e-mail to the distributor, who sends it to the stock exchange. The exchange will verify your details with the depository in 24 hours.Once you zero down on the scheme to invest, call the distributor and he/she will place the order with BSE. You will then get a confirmation text and mail, asking you to pay. For payment, BSE will use National Payments Corporation of India's Interbank Mobile Payment Service (IMPS). An investor has to register his mobile number with the bank. The bank will generate a seven-digit number, called mobile money identifier (MMID) and a password (m-PIN). BSE will also have an MMID. For fund transfer, you need to know the receiver's MMID (here, BSE's). You can then authenticate the payment, using your m-PIN, IMPS-enabled mobile banking application on your smartphone. You can also make payments by sending an SMS, in addition to internet banking.
However, financial advisors aren't enthused about the new platform. It has broadened the base of those who can transact on it, making it easier for investors."But nothing changes in terms of an investor's cost of investing because there is an intermediary involved," says Amit Kukreja, certified financial planner and a Securities and Exchange Board of India-registered financial advisor.
Instead, he feels, investing in direct schemes will be a better option. Apart from the annual demat charges (Rs 350-450), investors will also have to pay a fee for the intermediary at the time of investment. "Say you decide to invest Rs 2 lakh. At the time of transferring funds, you will have to pay the investment amount plus the intermediary fee to the stock exchange. The exchange will transfer the investment amount to the fund house and the fee to the IFA," explains Ramalingam K, director and chief financial planner at holisticinvestment.in. "Investors can access and monitor their portfolio and track it in one place through the platform. IFAs can charge their customers easily through it."
In comparison, the direct schemes are a better option for savvy investors who can select fund schemes, do separate KYCs, operate separate log-ins across fund houses to check scheme performance and so on. "Investors of direct plans can set up an account with aggregator(s) and monitor their portfolio in one place," suggests Kukreja. About 65-70 IFAs have registered on the platform.
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