Photo: iStock
Photo: iStock

Advisers are within their rights to ask for disclosure of assets as a standard practice

RIAs are allowed to charge fees directly from their clients for the advice they provide. Different RIAs charge fees differently from their clients

I have invested some amount in mutual funds with the help of a Securities and Exchange Board of India (Sebi)-registered investment adviser (RIA). I have also invested in other mutual funds schemes of my choice, as direct investments. However, the adviser is asking me to share the eCAS statement and says that whatever investments I have done on my own, I am required to pay a consultancy fee for that amount too. He adds that I am allowed to invest through any broker or directly without a broker but I must pay him a fee.

—Name withheld on request

RIAs are allowed to charge fees directly from their clients for the advice they provide. That is the only remuneration that they get for their services since they are not allowed to receive any commissions or other payments from manufacturers of the products that they recommend. Different RIAs charge fees differently from their clients. Some charge a percentage of the assets that their client invests in, some of charge by the hour, and some charge by a rate card. It looks like your adviser charges you based on your asset size. You should read the agreement that you would have signed with your adviser to get clarity on that. If that is the case, then the RIA is well within his or her right to ask you to disclose your investments. For one, he or she would need to know about your assets to advise you properly; and second, it is far too easy to take advice from a person, invest a small amount through the person and implement the same advice outside for a larger amount—all to just avoid paying the adviser. For these reasons, the adviser is well within his or her right to ask for the disclosure as a standard practice. If this does not sit well with you, you should consider moving to a fixed-fee adviser who would just provide the advice without requiring any information about how you invest.

Given poor performance of following funds, please advise if I should stay invested or move out of: SBI Magnum Gilt Fund - Long Term Plan (Rs2.5 lakh invested during October 2017) and SBI Magnum Gilt Fund - Short Term Plan (Rs 10.5lakh invested during October 2017). The investment time horizon was typically 3-5 years, but fund performance is worrying me.

—Babby Boss

The funds that you have invested in are pretty good funds in the category of gilt funds. However, gilt funds as a broad category (both short- and long-term gilt funds) have not fared well in the past year due to the interest rate scenario.

And, they don’t look particularly enticing for the upcoming year as well, with a flat or raising rate predicted. The question then becomes as to why you invested in these funds in the first place.

Many investors invest in gilt funds for the sake of the safety of investing in government bonds, ignoring the fact that these are about the most volatile of debt funds in the market due to their sensitivity to the shifts in rate climate.

So, considering these, my advice to you would be to stay out of this category and move to safer debt fund categories such as short-term or ultra short-term funds.

I am planning to invest in mutual fund through a monthly systematic investment plan (SIP) of Rs2,000 for 5 years. Please suggest which type of fund should I invest in, equity or debt, to get better returns. Also, what is suitable—direct or regular plans?

—Amit Kumar

The time frame you are considering can at best be considered short-to-medium term. For such an investment, it would be prudent to have a mixture of equity and debt funds with a slight orientation towards equity allocation. However, considering the amount of investment you are planning to make, you should go for a hybrid fund that has such a built-in asset allocation.

Hence, a balanced fund such as HDFC Balanced fund would suit your need well at this time.

Regarding direct or regular plan, if you are planning to take the guidance of an expert as you grow your portfolio, you should go with regular plans. But, if you are planning to learn about and invest in the markets on your own, you could go with direct plans.

Srikanth Meenakshi is co-founder and chief operating officer,

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