“They serve a major function in analysing funds and giving advice,” a CEO of a large fund said. The head of a large intermediary firm is worried that the growth of mutual funds that has happened so far will stop once no-loads are introduced, as “We have helped expand the market by getting new investors. This expansion will stop once no-loads are here”.

What do we finally want?

In an attempt to stop no-loads from coming in, what I am afraid of is that industry representations will deliver a compromise: exclusive no load funds. That’s not going to help us. What we finally want: a no load option on each and every mutual fund scheme.

Actually, no load funds is a future that has already happened. The option to offer no loads has been with the industry for many years now — the regulator has not mandated a ‘minimum’ load, only a ‘maximum’ one. Investors have been embracing mutual funds with a new confidence over the past three years, helping the industry grow to Rs 486,646 crore. But since it has not passed on the benefits of scale and growth to small investors, Sebi has had to intervene.

What the industry needs to know is that the no-loads ghost will continue to haunt it until it becomes investor-centric and changes its business model, which among many other things means distributors becoming fee-based financial planners and advising/ selling no-loads.