HDFC Securities on May 24 launched HDFC Money, a ‘goal planning’ platform that will suggest you a portfolio of mutual funds based on your time horizon, investment amount and risk appetite. The platform will also connect you with tax filing and will creation services.
After this Kotak Mahindra Group launched its ‘Super App’. Kotak Cherry today. The app was in the soft-launch phase for a few months and has now been opened to the general public.
Unlike HDFC Money, which will offer commission-based regular schemes (acting as a mutual fund distributor), Kotak Cherry will offer direct mutual funds. The latter has adopted a more market model, whereby users can buy stocks, bonds, fixed deposits, NPS and, at a later stage, basket of stocks and also international investments. The app currently requires you to have a Kotak Securities account for stocks and bonds, but will later be an ‘open architecture’ allowing other brokerages to invest as well. Kotak Mahindra Bank account is not required. With regard to fixed deposits, Kotak Cherry currently offers Kotak Mahindra’s own FDs, but will later offer Corporate FDs as well. The app also has mutual fund baskets maintained by Asset Management Companies (AMCs).
Kotak Cherry has been launched by Kotak Investment Advisors Limited (KIAL) which is a SEBI Registered Investment Advisor (RIA). Kotak Cherry will ultimately cater to both do-it-yourself or DIY clients and consultant clients. Currently, the platform is only open to DIY customers. With this, existing mutual fund distribution customers of Kotak Mahindra Bank will also be able to use Kotak Cherry. The distinction is significant as SEBI regulations do not permit RIAs to provide distribution and advisory services to the same client.
What investors should pay attention to
Traditionally banks have followed a relationship-manager (RM) driven commission-based distribution model. There are many instances when RMs are pushing products that are not suitable for customers, in order to earn higher commissions. While many banks enable investing on their own apps, the trend towards dedicated investment apps is new. Before investing, understand how the bank is earning its money. In case of HDFC Money, it is through distributor commission. In the case of Kotak Cherry, the model is not clear at the moment. However, it can also happen in the future through commissions on products such as fixed deposits or bonds, even if direct mutual funds are offered. There are also a number of non-bank owned apps in this space including Kuvera, Grow and Paytm Money, which offer freebies for many products (such as commission-free direct mutual funds). You should also keep all these in mind while choosing a platform.