I was so amused at a suggestion that Rs. 100 will be paid as a one time transaction cost for some select mutual fund agents, that I have no clue how to react.

Yesterday 2 media companies wanted to know how it would work. I said I have no clue – will they pay Rs. 100 per transaction or will they pay Rs. 100 as a one time fee I did not know. Today I know it is Rs. 100 per transaction and a SIP will be treated as a single transaction.

Simple do a Rs. 1000 SIP for 6 months – or worse Rs. 500 for 6 months, then the Rs. 100 is not bad is it?

Rs. 500*6= Rs. 3000, Rs. 100 is 3% FULLY UP FRONT LOAD…i guess. So if a client wants to invest Rs. 5000 per month do 10 SIPs.

Well this is just one of the solutions i guess?

Will it make the business attractive to get the advisors to sell mutual funds? I doubt it.

Somebody (no not me) should do an exercise on theoretically how much should be:

– the load payable by a big fund house

– the load actually paid

– why is there such a HUGE difference

– what happens to the load that got saved by change of ARN

– that money is supposed to be used for ‘investor education’ – who is monitoring this amount? If it is SEBI can we get the data or is this data private?

– who is planning to create data about the mutual fund industry? For e.g. I wanted to know how many SIPs are current, what is the average, why do people stop their SIPs,…..no clue where to find the answers….

just like that…

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  1. 100 bucks per sip transaction is abominable to say the least..

    A mutually assured destruction, given the SIPs have gained favors in the masses and majority of the SIPs are small tickets ones….

    A wise investor will love to switch to passive equity investment than…

  2. Wow another way to make people run away from Mutual Fund Industry.

    I for sure will run as most of my SIP are in 1K-2K range. Why would i pay 100 out of 1K which is 10% up front!!

  3. I hear that if i go direct instead of choosing a distributor this Rs 100 per transaction is not applicable. Well well in that case i can go direct in many cases where online SIP is possible. What happens to FundsIndia kind of company. Definitely Small investor like me wont choose to pay Rs 100 per transaction.

  4. On browsing the web portals, the only source available for this piece of news is ET.

    It is very difficult to analyse in the absence of details.

    Charging Rs.100/- as transaction fee for Rs.1000/- SIP and also for a lump sum investment of Rs.10 lakhs is amusing.

    The present inbuilt system of paying trail (from expense ratio) and upfront (out of AMCs P&L) can continue. There is no need to do something for the sake of doing some thing.

    One more interesting proposal I saw was tying up of an advisor to only fund house.

    If accepted, only corporate advisors with ‘mutual fund broking license’ (like insurance broking licence) can deal with all mutual fund products. This means that IFAs have to work under them as agents.

    IFAs are lot better than national distributors and institutional ones in keeping the investors interest in mind.

    Will they be able to do so if the above proposal is accepted?

    As always, more questions and no answers.

    In my opinion, not bringing back entry load is a good move as it has more disadvantages than advantages.

  5. I have been doing “direct” investments for 6 years now. Total assets in equity MFs is approx 18 Lakhs.
    My offer
    If MF houses are giving 1% trailing commisions per year, anyone who can become my broker, can earn 18,000rs per year just by adding his name to my folios.

    If any broker is willing to part with 12,000rs out of it (if cash is difficult, gift vouchers/movie tickets/travel vouchers/IPL tickets are also accepted 🙂 ), I am willing to do a deal.

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