Pooja Meswani & Pallavi Gupta, New Delhi: Were you always skeptical of investing in mutual funds because you feared brokers and distributors?

The move may result in the MF distributors losing out big money. SEBI has proposed to waive off the initial expenses for direct applications in mutual funds.

Keeping in mind the interest of the investor, SEBI is considering giving a waiver on the entry load of 2.25 per cent for direct applications received by fund houses.

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Presently, retail investors pay this charge on their investment, which is collected by fund houses to meet marketing and distribution expenses, even if they do not go through a distributor or agent.

Waiving off this charge, experts say, will attract investors to apply directly to the fund house and can mean big losses to these distributors.

Surajit Mishra, Senior VP, Bajal Capital said, “Investors who generally come to distributors look for some advice and SEBI has been a big advocate of paying for advice. I feel this move will contradict that statement.

You can directly go to AMC, after taking advice from distributor, choose a particular scheme and you get an opportunity to invest directly, obviously everybody would like to do that.”

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 Distributors say this may de-motivate them to sell mutual funds. On the other hand, fund houses are not too happy either. More than 98 per cent of the mutual fund investments come from 60,000 mutual fund distributors in the country.

What's more, direct applications to fund houses means employing huge manpower to handle distributor-related activities directly. Distributors may not be pleased with the proposal, but this move is in favour of the investor.

And will save investors from distribution costs and distributors' churning practices.

However, it remains to be seen if the proposal will be well accepted by the industry.