How to switch mutual funds from regular plan to direct plans in demat mode?

What’s the point of holding your mutual funds in demat mode and incurring charges? Not just that, the investments are in regular plans or commission oriented plans. Can you switch such mutual fund investments to direct plans? Let’s find out.

A reader recently sent this query.

I hold a number of MF in regular plans (growth) in demat form in my Sharekhan account. I now wish to convert them to Direct plans.

Will this be possible? Sharekhan portal cannot be used to redeem direct plans and hence it is of no use to convert and demat them there.

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Here’s the response.

Yes you can switch from regular plans to direct plans in mutual funds but not in Demat mode.

Let’s first understand that ICICI Direct and ShareKhan are distributors of mutual funds. They will not give you direct plans (goes against their business model).

Another point is that if you are using your Demat account only to hold mutual funds, then it is an expensive affair. I am a customer of ICICI Direct (not for mutual funds) and I find the MF transaction charges for SIP and Lumpsum exorbitant.

For the same charges, you can get good advice on your mutual funds and a decent transact platform (count Unovest as one) to invest in direct plans.

So, if you have to convert your regular plans to direct plans, you cannot do it in your current demat account. For this you have to first Remat them to ‘Statement of Account’ or SOA mode.

The Remat process for reconversion to physical mode as SOA is as below:

1. Obtain REMAT/Re-statementization Request Form (RRF) from your Depository Participant or DP.
2. Fill-up the RRF completely and sign by all holders.
3. Submit the RRF with your DP.
4. After due verification, the DP would register the request at his end and send the RRF to the AMC / RTA.
5. The AMC / RTA after due verification will confirm the conversion request to your DP for extinguishment of such units from your DEMAT account.
6. AMC/RTA will issue normal mutual fund statement of account confirming reconversion to physical mode for your record.

You cannot convert partial units under a particular folio to SOA. The entire folio with all the units needs to be converted.

This entire conversion process can take a week to 15 days after submitting your RRF with the DP.

Note: Mutual funds fund through BSE Star MF or NSEMFSS in demat mode cannot be converted to SOA.

Post the conversion to SOA, switch to Direct Plans

After the conversion is done, you can then use Unovest to switch from regular plans to direct plans.

Here’s how to upload your consolidated statement of mutual funds to Unovest.

Here’s how to switch from regular plans to direct plans on Unovest.

Portfolio Review before switch?

I am sure this is not a lone query. Specially after the rationalisation of mutual fund schemes, you have to reconsider your portfolio structure and ensure that it aligns with your goals.

Before taking the switch decision, consider a portfolio review with an advisor and see if some of your existing mutual funds have to be changed. If yes, then you can simply first sell them through your demat account and buy new funds in the regular SOA mode.

If some of the funds have to be retained, then you can switch them to the direct plans.

Does this help you? If you have a friend who does not recognise the futility and expensiveness of holding MFs in demat form, then do forward this note.