What to do if your mutual fund platform shuts shop?

Recently, Twitterati fussed about Paisabazaar apparently shutting down its mutual fund operations and suspending redemption requests. Here is a look at the broader fintech problem and what investors should do

What to do if your mutual fund platform shuts shop?

The most important attribute that can be ascribed to the decade gone by is, undoubtedly, 'digitalisation'. Fortunately, the investment industry has not skipped out on this revolutionary turnaround. In fact, there has been a deluge of fintech players lately that aim to simplify personal finance and investing for the common people. Interestingly, a growing number of do-it-yourself (DIY) investors have emerged parallelly. However, as it is said, there is no land without stones. Some of these new players might not have stable business models and hence they may decide to shut operations if the need arises.

But the best part is that as an investor, you need not panic about your investments. As regards Paisabazaar, the rumour seems to be technically misleading. As per our conversation with their customer representative, accounts of only some users have been suspended on their portal for the lack of correct personal details, though our email to the firm remains unanswered at the time of writing this. However, it seems that the company has not shut down its mutual fund arm. But the broader point here is about these fintech platforms in general. Let's face it, even if this fuss about Paisabazaar is untrue, we can not rule out a possibility for a situation like this to arise in the future. So, here is everything that investors should know about their mutual fund investments in case they worry about their favourite fintech player going through a rough patch.

Will I lose my existing investments?
Absolutely not. When you carry out any mutual fund investment, it is a transaction between you and the fund house. All these online platforms, mobile apps or even a distributor for that matter, are just intermediaries. So, even if they go bankrupt or close operations, you can easily transact in your existing investments through any other portal. For instance, when you onboard the Mutual Fund Utilities (MFU), the platform is able to fetch all your existing investments having a similar mode of holding, into your account and lets you transact in them. In fact, you can easily manage your investments through the website of the fund house itself. It's not like the case when a bank goes bankrupt and there is a risk of losing money. So, it's not necessary to put redemption requests for your mutual funds through your initial investment channel only. However, you may just find it a bit discomforting if you were used to the interface of the previous portal.

How can I claim access to my investments?
No matter what type of intermediary you pick, once you buy a mutual fund, a confirmation email and SMS specifying the units allotted is sent within five business days on your registered email address and mobile number. This discourse also has details about your folio number which is unique for every scheme of mutual fund that you invest in. You can think of it as just like a bank account number. In fact, periodically, the fund company sends you a statement of your investment just like your bank sends you an account statement. With the help of your folio number, you can redeem the money whenever you want.

Will I have to do my KYC again?
No. Completing KYC is a one-time affair. For managing your investments through the website of the fund company or any other platform, all you have to do is sign up using your mobile number/email id. Then, you can fetch all the details about your existing investments with the help of your PAN and the scheme's folio number.

How can I view my consolidated mutual fund holdings across all platforms?
A Consolidated Account Statement (CAS) is a single account statement that reflects all transactions of a unit-holder across all mutual funds schemes. You can request a mail-back of your CAS from the website of the RTAs such as CAMS and KFintech (firms that help asset management companies with record maintenance).

But you should keep one thing in mind here. Make sure to provide the same email address while making mutual fund investments because CAS aggregates your fund investments across all AMCs based on the provided email address.

To sum it up, your mutual fund investments are with the fund house and not the platform. It's you who owns the folio number and who has an absolute claim over your investments. So, if you have been oblivious of these things all this while, it's time to take charge of your investments and tread on a worry-free investment journey.

Worthwhile read: Is it safe to invest in mutual funds via online apps?

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