Question from an actual investor:
Hello, I just have a query on the FundsIndia offer. Is it a promotional offer, i.e., free/no charge of any kind for mutual fund investments via FundsIndia? Why would you do it ? The so-called “trail fees” – is it equivalent to 1-2 per cent? Is there a chance that due to recession, or any other reason that the existing accountholders will be charged? Generally, to run a website of this nature, there are some IT costs involved – if you don’t get maintenance charges, how can that be managed? I believe the above are genuine questions, and would request your reply for clarification.
Thank you for your interest in FundsIndia for your investment needs. The no-transaction-fee offer is not a promotion. It’s our business plan. It is the fundamental proposition on which we started our company. The servicing fees (trail fees is another term) that we obtain from mutual fund houses is not more than 0.5 per cent annually. However, we have worked out the numbers to know that it’s a scalable business that can be easily sustained with this revenue.
The key is our lack of physical presence and our online-only access. Our online presence means two things – we can reach customers without any geographical limitations, and we can scale easily – both of which will enable us to get many customers for a low-operational cost.
That is the secret – well, not a big secret, actually. We are following the Amazon model for financial services, one might say.