SEBI directing Mutual Fund Companies for direct options

SEBI has come up certain changes which shall change the dynamics and working of Mutual Funds Industry through Distributors. I have been already saying that going forward the Mutual Fund Distributors would have to become Advisors and charge fees from their Clients because earning brokerage/commission from the Fund houses shall become tougher day by day with new rules.

In accordance with one of the guidelines recently, SEBI has directed each Mutual Fund Company to launch an equivalent Direct Plan with a lower expense ratio with no commission to the Distributors.

Each Mutual Fund Scheme shall have Direct Option as well. So for every Mutual Fund XYZ, now there shall be XYZ and XYZ Direct Option. Hence while the XYZ scheme will be costlier for the Investors, the XYZ Direct Option shall be cheaper since no commission shall be made available to distributors on such scheme. Hence going forward the clients would learn about the scheme from their distributors and buy the schemes online at a cheaper cost.

Distributors have expressed their concern about the same, but SEBI has been firm on its stand and going forward more changes are expected on the same.

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