A brilliant move by Sebi to remove the upfront commission in the mutual fund industry. Awesome.

What is the implication of this?

1. Will the Investor get a better NAV? NO. he was anyway not paying any load.

2. Will the big distributor be hit? I mean somebody who has say Rs. 50 crores Aum and has been around for say 15 years? NO. Not at all.

3. Will it hurt the amc with say more than Rs. 50,000 crores aum? No. Not at all.

4. Specifically will it hurt Templeton? No, not at all, they have been paying trail for a very long time.

5. Who gains by doing this? Difficult to say.

6. Why has this been done? Difficult to say.

7. Will it benefit the Asset management Companies? Yes the big ones – because if the small ones are rendered ineffective, more money will flow to them.

8. Is it a deliberate ploy to get rid of the small mutual fund houses? Come on do not be so blunt. None of us are so brave to say that.

9. Will banks stop getting paid for doing business? Upfront commissions, yes, surely.

10. You mean banks will not be paid ANYTHING  for bringing business? No, not exactly.

11. Are you not contradicting in points no. 9 and 10. Well no. Banks will be reimbursed for conducting training, travel, bank employees will be sent to Goa, Egypt, West Indies, US or Europe depending on how well they do. Of course the AMC what these guys do in these foreign locales. Y

12. Subra you mean the regulator does not know this?

I do not know. Will the regulator allow such things to happen? Of course not.

13. Unlucky number!!

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  1. is it by SEBI or by AMFI? regarding point no.7, the small AMC like QUANTUM seems rejoicing:
    ” Thus, it is heartening to note that things might be about to finally change for the better. The Association of Mutual Funds of India (AMFI) has proposed that asset management companies should scrap upfront commissions. If this is implemented, it would be a hugely positive step for investors. Under this system, agents will be paid over the period of time that an investor chooses to remain invested. This will force agents to sell equity MFs as long-term investments. This is exactly how they should be sold. “

  2. If the idea behind this move by SEBI is to safeguard customers’ interest, and the distributor/agent is compensated for the loss of upfront commission through regular trail/periodic brokerage, it is welcome. This could also be an attempt to slowly do away with commissions and bring in advisory fees/profit sharing. While this works well abroad, India is still not a market where the masses believe in paying for such services!

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