HDFC Securities on May 24 launched HDFC Money, a “goal planning” platform that will offer you a portfolio of mutual funds based on your time horizon, investment amount and risk appetite. . The platform will also connect you to tax filing and will creation services.
This was followed by the Kotak Mahindra Group which today launched its “super app” Kotak Cherry. The app had been in the pre-launch phase for a few months and is now open to the general public.
Unlike HDFC Money which will offer regular commission-based plans (acting as a mutual fund distributor), Kotak Cherry will offer direct mutual funds. The latter adopted more of a market model, allowing users to also buy stocks, bonds, term deposits, NPS and, at a later stage, baskets of stocks and international investments. The app currently requires you to have a Kotak Securities account for stocks and bonds, but it will later be “open architecture” allowing those with other brokerages to invest as well. A Kotak Mahindra Bank account is not required. As for fixed deposits, Kotak Cherry currently offers Kotak Mahindra’s own FDs, but will later also offer corporate FDs. The app also offers baskets of mutual funds created by asset management companies (AMCs).
Kotak Cherry was launched by Kotak Investment Advisors Ltd (KIAL) which is a Sebi Registered Investment Advisor (RIA). Kotak Cherry will cater to both do-it-yourself or do-it-yourself customers and advisory customers. Currently, the platform is only open to DIY customers. This would allow Kotak Mahindra Bank’s current mutual fund distribution customers to also use Kotak Cherry. The distinction is important because Sebi’s rules do not allow RIAs to offer distribution and advisory services to the same client.
What Investors Should Note
Traditionally, banks have followed a commission-based distribution model driven by the Relationship Manager (RM). There have been instances where RMs have pushed products that are not suitable for customers, in order to earn a higher commission. While several banks allow investing on their apps, the trend towards dedicated investment apps is new. Before investing, understand how the bank makes its money. In the case of HDFC Money, this is through distribution fees. In the case of Kotak Cherry, the model is unclear at this time. However, this can also be done through commissions on products such as term deposits or bonds in the future, even if direct mutual funds are offered. There are also a host of non-banking apps in this space, including Kuvera, Groww, and Paytm Money, which are free for many products (such as commission-free direct mutual funds). You also need to consider all of these when choosing the platform.