The Right Mutual Fund Dealer: Here’s How To Choose
Information about anything and everything is available at our fingertips. In this age of information technology, we investors are fortunate enough to access and gain knowledge about various mutual fund schemes, their returns, etc. And all this information can be accessed for free.
It is also no different for those who provide financial services. There would be a lot of emails, messages and websites hoarding to provide information.
Many mutual fund distributors will approach you to solicit mutual fund investments in new and existing mutual funds. Especially now, as the economy is coming back from its recession and the markets are becoming investment friendly.
Although most of the information that is sent to us is already on the Internet. We can easily check the information about a fund from the AMC (Asset Management Company) website. Still, for some investors, it can be a valuable service.
These mails and messages keep us updated on new releases, returns of various schemes, their NAV (Net Asset Value) and many other pros and cons related to them. But is that all we need to know about investing?
Don’t you think it would be wise to choose the best mutual fund dealer who can help you manage your investments? What if all this information only adds to your confusion?
With many mutual fund schemes changing names and portfolio rebalancing, most investors are confused about what to do with their mutual fund holdings.
It may make sense to work with a mutual fund dealer who can advise and guide you in your investment decisions.
Returns alone are not a sufficient basis for selecting the right mutual fund dealer. There are many other things you should look for.
1. Mutual Fund Distributor Qualification
The Association of Mutual Funds in India (AMFI) requires individuals engaged in mutual fund advisory service to have a certification issued by the National Institute of Securities Management (NISM).
But simply relying on certification is not enough, as you would need to dig a little deeper into the philosophy (attitude and rationalization) and vetting process that the mutual fund dealer and his team adopt when advising clients. In addition, you must ensure that the dealer is not an individual selling investments as a side business. Remember, following the advice offered by a mutual fund dealer who doesn’t have the necessary knowledge could spell disaster for his money and investments.
2. Mutual Fund Distributor Experience
Check out the experience of the mutual fund dealer and his team. Check how well qualified they are in terms of education and what kind of knowledge and experience they have.
Also, find out if the dealer has a good understanding of the full range of asset classes. Such as stocks, debt, fixed income, gold, etc.
They must be able to understand and figure out how these asset classes would be affected by various events, decisions or changes in national and international trends related to oil prices, interest rates, etc.
Understanding mutual funds, identifying their suitability for you and your investment portfolio, balancing asset allocation, and knowing how asset changes will affect you requires a high degree of experience.
So you need to check how skilled the dealer is and what kind of experience he has. The mutual fund must be able to identify products that meet the requirements of your life when you need them.
3.Accessibility
The mutual fund dealer you choose should be easy to find. Either by email, phone, or by meeting in person within a reasonable amount of time. It is important that the dealer, to whom you have entrusted your money, is accessible when you need it. The distributor or team must be able to clarify your doubts within a reasonable period of time.
Can this dealer execute the trades for you on time? Time is of the essence in the world of investing at Best Mutual Funds and Stocks. The dealer should be able to execute your trades in no time. As fast as possible.
All of these things matter when it comes to your hard-earned money.
4. Provide Complete Financial Solutions
We Indians do not like to discuss our finances or financial status with everyone. Because we have been taught not to disclose our finances and investments to too many people. We have been taught to keep such things and details confidential and secret.
Therefore, it would be preferable to find a dealer that is a one-stop solution for all our financial needs. An advisor who can better understand and manage our investments and with confidentiality. An impartial one. One that can offer us mutual fund products from all the fund houses. Not just one or two fund houses.
5. Does the dealer ask questions?
This is the one attribute that will tell you if a mutual fund dealer is only interested in selling or is really interested in understanding your requirements and needs. And then carry forward the investment accordingly.
Is he asking you questions to better understand your financial needs, situations and goals? Or are you only given details about the products to convince you to buy a product and not the solution you are really looking for?
Without asking questions, how could someone know for sure which particular plan is best for you? Can you risk investing in small-cap companies or should your investments be limited to debt mutual funds? Do you have one or two Life and Health Insurance or not? These two are essential to have before you start with mutual fund investments. To secure our loved ones.
Not only helping investors, but all this information is also collected from them and other investors across the country and sent to fund houses. With this data collected, fund houses, as well as the government, can better understand the moods and inclinations of investors. It also helps them come up with new policies and policy changes. New Forex Strategies. Develop and propose new and attractive plans.
6. Infrastructure and Value Added Services
In addition to evaluating your qualifications and attitude towards customers, you must also judge whether you have the right infrastructure. Would you be able to receive prudent advice continuously? Remember entering an investment is just a start. You want your investments to be regularly monitored and tracked. The change must be promptly reported if an investment has become redundant or is not performing.
Therefore, ideally, you should be provided with various tools and calculators for online tracking of your investments, as an added value.
In addition, the mutual fund dealer must send regular updates about your portfolio. What changes can be made in accordance with changes in market conditions and financial objectives? What developments have been made in the field of mutual funds? What new plans have emerged? What new policies have been devised that will benefit you or vice versa?
7. What kind of after sales support is provided?
As stated above, entering an investment is simply a starting point. Only with the help of prudent and reliable after-sales support, we could monitor, track and promote our investment portfolio. All the tracking tools may not be so easily understood by all investors.
The reason for investing with a mutual fund dealer and not investing in direct mutual funds is that we are not familiar or comfortable with the market. All the reports that fund houses periodically send to investors are too full of jargon that we don’t always understand. To interpret them, we require the help of professionals. This help must be provided by the mutual fund dealer.
As and when you need it. Not how and when it is convenient for them.
8. Past history
Well, if they offer you this, you will be able to measure the quality of the advice. You need to cross check the data provided by him/her with some of his/her clients as a reference check. The best way is to ask for references.
Use social networks to find out if someone has recommended the advisor or his firm. Check online for references, ask your friends or family if they know of any references. What kind of knowledge and experience is associated? This way you can get an idea about their strengths and weaknesses.
Inspect how long the advisor has been in business and how they operate. Find out what field the mutual fund dealer worked in and what knowledge he/she and the team have. Someone who has been through multiple market cycles would be experienced and therefore preferred.
Not only will this exercise help you understand your past performance history, but it will also help you recognize whether or not prompt and reliable after-sales service is provided.
At the moment, there is no formal rating or classification system for mutual fund distributors in India. So we have to figure it out on our own.
9. Compensation
A mutual fund dealer is in this business to win. Whether it is an individual, a partnership or a business, it could not survive for long if it does not receive compensation.
Maintaining a website, helping you make a financial plan, collecting data on your behalf, keeping it free for you, and keeping all of these services alive takes effort and money.
Many planners and financial advisors may charge a fee for the same. Write a comprehensive financial plan, taking into account risk appetite, future requirements and life goals. You are asked to pay them a fee, regularly. What they do not tell you is that they also receive a commission for all the investments they make on your behalf.
Whether or not a mutual fund dealer is honest with you, this is the crucial criteria to check.
Bottom line
Today, with so many options available for investing, the task of prudent investment planning has become quite difficult. Because we are surrounded by a lot of information about each of these options, such as stocks, mutual funds, bank FDs, NCDs, corporate bonds, Public Provident Funds (PPF), National Savings Certificate (NSC), etc.
And yet, at the end of all the searching and evaluation, we are still wondering if we made the right investment decision.
Why?
In order for us to eliminate this chaos caused by “information overload”, what is required is to find a mutual fund dealer who provides independent and unbiased financial advice. No vested interests (commissions). The one who would help, assist and guide you through prudent investment planning.
This is what the best Mutual Fund Distributor will do for you. This is the vision and goal of WealthBucket.