Fin planners say no-load funds not viable now

Financial Planning Standards Board India (FPSBI), an umbrella body representing mutual funds, banks and insurance companies, has called the Securities and Exchange Board of India's (Sebi) recommendations on the introduction of no-load funds, consumer centric. However, the board added that it may not be viable to introduce the recommendations in their present form.

"Such a measure, if implemented in its present form, is likely to hamper the growth of the mutual fund industry," said the chairman, Shailesh Haribhakti.

The financial planners' board has recommended the introduction of variable load funds, depending on client needs.

"There should be no prescriptive notions of what should or should not be charged. Since all investors may not have the same need for financial advice, the need should be priced between the buyer and the seller," said Haribhakti.

Sebi had issued a discussion paper on no-load mutual fund schemes in August and invited comments from investors and industry alike.

While investors have welcomed the recommendations, the industry has expressed reservations as there is heavy dependence on the distributors to sell mutual fund schemes.

Asset management companies should consider the establishment of dedicated no-load funds, according to FPSBI.

However, investors should not migrate to such funds only because they charge no load. This is where the role of the financial planner is crucial. The FPSBI has sent written recommendations to Sebi and is awaiting the regulators' response.