Many fund houses have incorporated a sentence in the application form asking investors to pay the upfront commission to Amfi-registered distributors based on the investor's assessment of the service rendered by the distributor.
HDFC Mutual Fund, DSP Black Rock, ICICI Prudential Mutual Fund, Mirae Assets and Taurus Mutual Fund have already started doing this, while IDFC Mutual Fund is also planning to do so in the future.
The Securities and Exchange Board of India (Sebi) had announced a ban on entry load on mutual fund investments from August 1, 2009. Under the no-load regime, distributors had been asked to charge commissions direct
ly from investors.Ever since the entry load ban, mutual fund distributors have been facing problems in collecting commission from investors and, hence, they have shown a
reluctance to sell mutual fund schemes. In turn, this has hit businesses of AMCs.Mirae Assets chief executive officer, Arindam Ghosh, told Financial Chronicle that his fund house was among the first ones to take the initiative.
"We as a industry need to support the distributors in shifting form a sales model to advisory model. We also need to encourage them (distributors) to offer quality advice to investors," he added.
SMC Wealth managing director, DK Agarwal, said it's a good initiative as most small distributors have been facing a tough time after the entry load ban.
"The mutual fund business is highly dependent on distributors and it is important for the industry to support them in this transition phase," he added.
Since the entry load ban, the mutual fund industry has grown barely 3 per cent from Rs 721,886 crore on July 31, 2009 to Rs 7,43,116 as on May 31, 2010.
