Translated into English, it means if a household wants to invest in an existing equity mutual fund (MF), it need not pay the 2.25 per cent charge or load that goes to the distributor. Investors who know enough about funds to be able to track performance — it’s easy since, unlike in insurance products, there is only one number to track (growth of net asset value) — can now invest directly, without paying the load. Quite like their high net worth brethren or institutions who don’t pay load (generally for applications above Rs 5 crore). They need not pay the 6 per cent for a new fund offer either.

In the tanned leather armchairs of distributor board rooms, wails have begun. Predictably, they are afraid that they will lose business. Sure they will, but only those who have been behaving like courier boys. Distributors and agents who have graduated into becoming financial planners have nothing to fear — their advice, if good, will help them keep their clients, customers and of course, commissions.

In fact, this is a good opportunity for the distributor community — banks, companies and individuals — to aspire for and transform into an industry of financial planners, where apart from commission they can charge for advice. Of course, for that to happen, they must be regulated and steps are on towards the creation of a self-regulatory organisation. They must also realise that perhaps they’re only objecting to change as a concept — nobody likes to step out of a well-functioning, profitable paradigm. I don’t think this move will make distributors redundant; the loss in customers, if any, will be to the tune of 3-5 per cent. For investors, of course, it’s a win-win.

... contd.