Bharti Axa Mutual Fund has devised a new way to persuade investors to switch to the online model. The fund house is launching a plan under its maiden equity scheme, wherein investors opting to receive all communication through email will be charged 0.25 per cent discount on management charges.
The fund house is projecting it as a green initiative to reduce paper consumption, but rivals have termed it as a move to reduce operating costs.
Though the concept is not new, as the email option already exists for investors, the Bharti Axa fund is unique in that it will pay back its investors from what it saves by cutting down on expenses arising from physical delivery of statements.
“We are promoting online servicing of clients through this model. It is the power of compounding that will add up returns for the investors in the long term. We are also in talks with large distributors and banks to market this plan,” said Vikas M Sachdeva, country head (business development), Bharti Axa Mutual Fund.
However, an industry official disagreed, saying, “It is nothing but cost-cutting. There is a challenge in terms of mailing cost. It takes Rs 8 to deliver a couriered statement to the investor. So the fund is basically trying to make the scheme attractive by these perks. The reality is that in India, customers still want to see statements in the paper form. Less than 8 per cent of our investors today opt for the email option.”
At present, mutual funds charge at least 1 per cent as management charges, which is one of the streams of revenue for fund houses. But under this plan, while Bharti Axa Mutual Fund will save on mailing expenses, it will have to bear a part of the management charges, which is being offered to investors as monetary compensation.
The reduction in management charges will also be reflected in the net asset value (NAV). If for a normal investor, the NAV is Rs 10, the NAV for an investor opting for the plan will be Rs 10.025.
The fund house is projecting it as a green initiative to reduce paper consumption, but rivals have termed it as a move to reduce operating costs.
Though the concept is not new, as the email option already exists for investors, the Bharti Axa fund is unique in that it will pay back its investors from what it saves by cutting down on expenses arising from physical delivery of statements.
“We are promoting online servicing of clients through this model. It is the power of compounding that will add up returns for the investors in the long term. We are also in talks with large distributors and banks to market this plan,” said Vikas M Sachdeva, country head (business development), Bharti Axa Mutual Fund.
However, an industry official disagreed, saying, “It is nothing but cost-cutting. There is a challenge in terms of mailing cost. It takes Rs 8 to deliver a couriered statement to the investor. So the fund is basically trying to make the scheme attractive by these perks. The reality is that in India, customers still want to see statements in the paper form. Less than 8 per cent of our investors today opt for the email option.”
At present, mutual funds charge at least 1 per cent as management charges, which is one of the streams of revenue for fund houses. But under this plan, while Bharti Axa Mutual Fund will save on mailing expenses, it will have to bear a part of the management charges, which is being offered to investors as monetary compensation.
The reduction in management charges will also be reflected in the net asset value (NAV). If for a normal investor, the NAV is Rs 10, the NAV for an investor opting for the plan will be Rs 10.025.
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