One of the biggest dilemmas facing IFAs today is choice of transaction platforms - and it all boils down to MFU vs BSE vs NSE. Each has its advantages and disadvantages, and each will have different appeal based on what you want out of a transaction platform.

WF approached the young, tech savvy Gajendra Kothari to give us an independent assessment of all three major platforms and also requested him to give pointers on how IFAs can make a choice based on what they really need. We are grateful to Gajendra for compiling this 4 part article series, where he shares his perspectives on each of the 3 main choices and provides us with a very practical 10 point program on how to get started with using these platforms.

In this, the first part, he covers the pros and cons of the MF industry's shared services initiative, MF Utility, covers the key issue of MFU promoting direct plans and asks a very pertinent question: why is no AMC promoting MFU?

M F Utility

MFU is a "Transaction Aggregating Portal" that connects with key stakeholders including RTAs, Distributors, RIAs, Banks, AMCs, etc., thereby mitigating the risk relative to the current paper based transactions.

MF Utilities India Pvt Ltd (MFUI) is the Mutual Fund Industry's "Shared Services" initiative formed by the Asset Management Companies (AMCs) of SEBI registered Mutual Funds under the aegis of AMFI, with an objective of investor empowerment, distributor / RIA convenience, consolidation of information to various agencies, operational efficiency for RTAs and benefits to AMCs, thereby benefitting all stakeholders in the industry. The prime objective of MFUI is to act as a "Middleware" between the transactors and processors by consolidating all "Transaction Requests" received by the industry from multiple sources and transmit these requests to respective Transfer Agent of the AMC, thereby bringing in operational efficiency by reducing multiplicity and duplication of activities. Towards achieving this objective, MFUI has developed the Portal, MF Utility (MFU), which operates as a "Transaction Aggregating System" for transactions in Mutual Funds.

MFUI is equally owned by the AMCs of SEBI registered Mutual Funds in India. It is also a No Profit oriented organization which can be both good and bad for various stakeholders.

Use common transaction forms even if you don't go online

One of the biggest advantage for distributors is that even if they don't want to sign with MFU, they can still use the Common Transaction forms for making purchase, switch, redemptions etc in the AMCs which are part of MFU and can submit these forms to any registrars. In a single form, one can do up to 5 purchases of 5 different mutual funds. That's a lot of saving of time and efforts. For investors who have not opened the CAN yet, multiple transactions under a single folio of an AMC can be submitted through a single form at a single POS. For this, use Folio Transaction Form (FTF). For investors who have opened CAN, multiple transactions in different schemes of different AMCs can be submitted through a single form quoting CAN at a single POS. For this, use CAN Transaction Form (CTF). By using either of the above form, the investor can submit a single cheque for multiple investments. This means that you don't have to keep any AMC forms at your office. Imagine the de-cluttering as a result of this.

Does MFU promote direct plans?

Also a biggest misconception which many distributors has that MFU promotes direct plans which is not true. It is just an aggregator system created by the Mutual Fund Industry for both distributors as well as investors and hence they have no option but to provide this facility to investors if they wish to. However, the investor will need to approach MFU and ask for the login id and password and only then he can invest online directly.

The Direct Plan feature of MFU may be great for Registered Investment Advisors (RIAs) who may want to execute for their clients under the said plan. All they need to do is sign with MFU under the RIA category and start using it for their clients under the Direct Plan.

Another feature of MFU which can be both good and bad is CAN No created once is valid across all distributors. The data given in the CAN for supersedes the data in the existing folio (like nomination details, bank accounts, email id, mobile no etc)

Why is no AMC promoting MFU?

One thing which perplexes me is if the platform is owned by all the AMC then why not a single AMC is promoting the same. It will help them reduce paperwork, achieve faster turnaround time, reduce errors etc. I have never seen a communication from any AMC to this regard. Why can't AMCs create CAN for all investors in the industry and move to a single number rather than having so many folio numbers. Since CAN is universal and can be used by any investor or distributor or platforms, MF Industry should create CAN as a single number for the investors in the industry and phase out creation of folio numbers, in a similar way post DEMAT account, the folio numbers of companies were done away with. This will streamline the industry to a great extent.

However, AMCs are still busy promoting their own online portals which is very short sightedness. Its time each AMC owns the responsibility (since they anyways own the platform) and push the use of MFU for their own long term interest.

For more information log onto www.mfuindia.com

Share this article