Data released by the Association of Mutual Funds in India shows that the share of direct plans in the total active systematic investment plan (SIP) accounts has risen to 31 percent in three years, from 20 percent, a report by Business Standard stated.
Every MF scheme has two options: regular and direct. Regular plans are sold by MF distributors who get commissions in exchange while the direct do-it-yourself plans require no commission to be paid to the distributor, who typically helps investors with the paperwork, explained the report.
However, BS pointed out that while the number of accounts through the ‘direct’ route has increased, the share of direct plans in the total SIP assets under management (AUM) hasn’t grown proportionately. As of August 2020, direct plans accounted for 13 percent of the total SIP AUM and have only risen to 16 percent since then, it informed.
This is a result of two factors. Most direct SIP accounts are newer, as opposed to regular plan SIPs. Also, the average SIP ticket size made through direct channels is lower, noted that BS report.
"Nearly 91 percent of investor accounts older than five years are ‘regular’ SIPs, underscoring how direct SIPs are a relatively new development. The share of direct plans improves if SIPs are older than three years. Yet, they are only a third of total accounts," it pointed out.
According to the CAMS MFDEx data for April, the average SIP ticket size for online investment platforms was lower, in contrast to regular plan distributors, noted BS.
"For instance, investors on PhonePe’s platform invested an average of ₹816 per month, while Groww’s average SIP size was ₹1,559. By comparison, premium regular plan distributors like NJ India Invest and State Bank of India had an average SIP size of ₹2,779 and ₹2,047, respectively. As a result, the average AUM of direct SIP accounts was much lower, compared to direct plans," it explained.
As of August, the average AUM of SIP accounts in direct plans was ₹57,000, against ₹1.37 lakh in the case of regular plans, said the market daily.