MF sellers find it hard to stay afloat

MUMBAI: Several mutual fund distributors are finding it hard to stay afloat these days. Even 10 months after the Securities and Exchange Board of India (Sebi) banned entry load on mutual funds — taking away the upfront commissions earned on selling mutual funds — these firms are yet to find a viable way to charge their clients for the advice they offer.
According to industry players, many of these firms are likely to meet the fate of several independent financial advisors (IFAs), who have just vanished from the scene after the entry load ban came into effect in August.
"Distributors are really struggling to find a way how they can charge the clients. Since there is no uniform fixed fee one can charge, it is really difficult to ask a client to pay up for the advice," says Mukesh Dedhia, director, Ghalla & Bhansali Securities. "We really have to find a way out soon. Otherwise, we would also end up like those IFAs which couldn’t survive after the entry load ban. The industry has to come up with some standardised fee structure, otherwise it would be really tough to survive," says a mutual fund advisor, who doesn’t want to be identified. "The cost of setting up the infrastructure in Mumbai is very high. So, even if there is a uniform fee, the firm in Mumbai would find it difficult to survive," he says.
"It is true that many small players find it difficult to operate after the no-load structure came in August. But I think larger distributors with a diverse product range and better resources would be able to adapt to the changes better," says Sandeep Dasgupta, CEO, Bharti Axa Investment Managers.