No Conflict of Interest
We distinctly recommend high-quality investments which are best for you and have the potential to generate long-term wealth. Our research on this is completely independent and unbiased. We do not take any commissions from anyone for any product whatsoever. Hence, we strongly recommend that you only buy Direct Plans of the Mutual Fund Scheme and reject regular plans. You are free to buy the schemes from the platform of your choice (the Finacular Founding team directly buys from the websites of Mutual fund houses).
However, we charge a modest subscription fee for offering all our services, providing access to the platform and our recommendations. The subscription fee allows us to work in your best interest without any conflict of interest. The companies that claim to provide a completely free platform, actually take commissions from the Mutual fund houses or providers of other products they recommend. They also try to convince you that the fee is not being paid by you but the service providers whose products you invest in.
You should not be deceived by these completely misleading claims, and realize that there is actually no free lunch. It is simply not possible for anyone to provide high-quality services for free. Ultimately it is you who unwittingly ends up paying the fees, which is actually exorbitant.
Let’s try to understand this better. Take the example of regular plans while investing in mutual funds. You must have heard your advisor say that if you invest in a regular plan, you do not have to pay anything to the advisor; because he/ she gets paid directly from the mutual fund house. Now, this is true in principle, but that’s not how it actually works.
Suppose you want to invest Rs 100. If you invest via a direct plan, the mutual fund house, in fact, invests Rs 99 on your behalf and retains Re 1 (1%) as their management fee. However, in the case of regular plans, the mutual fund house invests only Rs 98 on your behalf. Re 1 is still retained by them as a management fee, however, the additional Re 1 is paid to your advisor/broker/platform from where you are buying the funds. In actual fact, it is your money that is paid to the broker. The Mutual fund house pays it on your behalf, without you knowing it.
The typical fund management fee for good equity mutual fund schemes may be anywhere between 0.75% and 1.5%. In addition to this, in the case of regular plans, the broker might get anywhere from 0.5% to 1.5% as commission.
You must be thinking that a 1% commission is negligible and would hardly make any difference in the long run. You need to rid yourself of this misconception immediately because, over a long period of time (say 10 years), the value of this 1% commission is humongous and could be as high as 30-40% of the total profits which you would have made.
We have covered this in more detail here. Hence, we strongly advise that you refrain from regular mutual fund plans, commission-based products, and any such advisors/ platforms that claim to offer free services.