Common service platform for MFs a sound idea but SEBI must examine why it didn’t work before
The Securities and Exchange Board of India’s (SEBI) recent circular asking registrar and transfer agents (RTAs) to develop a common platform for investor services in mutual funds is an important step forward in improving investor experience with mutual funds and disintermediating the industry. RTAs have been directed to share their data feeds, ensure inter-operability and work with AMCs, depositories and intermediaries so that investors can make service requests or effect financial transactions on a single platform. SEBI expects the initiative to be fully operationalised by December 31.
A common RTA platform, should it take off, can make the mutual fund investor’s life easier on several counts. While slick new apps — both direct and distributor-driven — have sprung up for fund investors to buy or sell units, the process for non-financial transactions such as changing one’s KYC or bank details, requesting account statements or making nominations remains cumbersome. Investors can route such requests through distributors but given that it is the RTA who gets paid for the service, such requests aren’t a priority for the distributor. Self-service requires investors to juggle multiple usernames and passwords across AMCs even for simple requests such as updating bank details or changingthe address. A common RTA platform enabling investors to make such changes at one go can help reduce instances of KYC mismatches or instances such as investors losing sight of their legacy investments or not informing their heirs of their fund holdings which have led to a large build-up of unclaimed amounts (over ₹40,000 crore by one estimate) with mutual funds. The new platform can also offer the investor a single-window view of his fund holdings, facilitating timely rebalancing and allocation decisions. Today, with an investor’s fund holdings splintered across multiple platforms, intermediaries and AMCs, laying one’s hands on a comprehensive overview of one’s portfolio on any given date, is a tall ask.
Despite its clear benefits though, the regulator has not had much success with popularising such a common platform in the past, a case in point being the MF Utility, a shared services platform flagged off in 2015 with very similar objectives. A common platform, if user-friendly, is quite likely to disrupt intermediaries such as RTAs, distributors and direct transaction platforms. RTAs will need to figure out who will foot the bill for the additional costs they incur in creating and maintaining this utility. Distributors who are focused mainly on executing transactions will need to unearth alternative ways to add value to their customers to justify their commissions. New-age direct transaction platforms, which are still finding their feet on revenue models, can lose customers to the new entity. To ensure that there are no back-door attempts to scuttle this idea, SEBI must study the MF Utility and see if it can be repurposed. Investors used to other modes of transaction should be offered seamless and cost-free migration to this new platform.