Regular or direct: answering the hardest question honestly

Sooner or later a client says, “My colleague says direct plans are cheaper. Why should I invest through you?” Many distributors flinch, change the subject or criticise direct plans. All three lose trust. The honest answer is the strongest one.

Say the true part first

“Yes. A direct plan of the same scheme has a lower expense ratio, because there is no distributor commission inside it. Through me, you invest in the regular plan, and the fund house pays me a trail commission out of the scheme's expense ratio, and for some new investors a one-time incentive. On your amount that is roughly this many rupees a year.” Then show the number from the AMC's table.

Then say what the difference pays for

• Understanding your goal and keeping the plan suitable as life changes.
• Doing the paperwork right: KYC, nominee, mandates, address and bank changes.
• An annual review, and a call before you panic in a fall.
• Being one person who knows your whole picture.

Then make it the client's choice: “If you are confident doing all of this yourself, direct is a sensible option, and I am glad to explain how. If you want someone to do it with you, that is what I am here for.”

Why this works

Clients can see the commission on their half-yearly consolidated account statement (CAS) anyway. A distributor who discloses it first, in rupees, is trusted. One who hides it is found out later and loses the client and their referrals.