Missing the Obvious

The hot topic in last few days have been about SEBI and how they are killing the distributor by making it known to the investor, the fee he pays (indirectly). Much comparison was made as to how Insurance agents had a free run before Manoj Nagpal put out a tweet clarifying things a bit. He said and I quote

Life Insurance Cos already disclose commission. Benefit illustration – which has to be signed by client – has it (buried in lot of paper) 

The human eye, its said doesn’t register / record everything. It instead takes snap shot and stitches to get a complete picture. Since the amount of data that is collected is huge, a lot of things are just zapped out unless we force ourselves to look at the same.

When we are driving, we see and observe traffic to make sure we don’t break laws (Signals) nor cause accidents. Yet, you cannot remember the colors or models of the last cars you overtook. Yet, the fact that we overtook them means that we did observe them for a while at the very least.

When we are making investments, what are we looking at? We are looking for major things like writing down the right information and selecting the right scheme. If we have already decided what to invest in, the least thing that the mind will focus on is commission that will get paid pursuant to our acceptance.

Just today, I fell for the same when I made a investment via online portal that allows one to invest directly. My focus was so much on registering and investing that I missed the fact that they charge a platform fee of Rs.948.00 per year. My whole idea of using the platform was to invest direct (and this fund by the way is not something they recommend either) yet I missed the obvious fact that I was paying them for just providing me with the ability to invest & monitor (something that I could have done a whole lot cheaper elsewhere).

I instantly wrote back to them and received a call wherein I was assured that since the transaction has been completed, they will make a special case and not levy (again, this levy is not auto-debit and I would have had to pay if I wanted to continue my usage of the portal) the fee.

A thousand bucks is not really expensive, but given the fact that most mutual funds provide you with the ability to invest online for free and monitoring is easy given once again the plethora of sites and apps (most being free), one needs to question what exactly he is paying for.

Of course, since the fee is fixed, once investments cross a certain barrier, the charges get diluted (as % of AUM). But if you are doing a one off lump-sum or a SIP, you still do not get the full advantage of the difference between the Direct and the Regular scheme even though you yourself would have done all the hard work.

In my own case, I learnt a valuable lesson that I thought I knew very well – nothing comes for Free

🙂