The Indian mutual fund (MF) industry will witness one of its major transformations from August 1, as the ban on entry load investments in all MF schemes imposed by the market regulator Securities and Exchange Board of India (Sebi) comes into effect.

Several people linked to selling MF products, from asset management companies (AMCs) to distributors and independent financial advisors (IFAs), have started to plan their strategy to sell a MF product.

Last month, Sebi had banned entry load from August 1 in all the MF schemes. An official from a major AMC say this move will impact their profitability, while distributors will now focus more on selling other products. Sundeep Sikka, CEO of Reliance MF said, ?This decision is certainly a game changer. However, it will be beneficial for us in a long run. In the first few months, there are chances that we might face some challenges and our profit margins are likely to take huge hit.?

Some fund houses are yet to take a decision on what commission will be paid to the distributor. A Balasubramanian, CEO of Birla Sun Life Mutual Fund said, ?It one of the important decisions for the fund houses. But we will be announcing our future plans in a few days.?

Sebi has also directed AMCs to carry a suitable disclosure on the application forms that the upfront commission will be paid by investors directly to the distributors, based on his assessment of various factors, including the service rendered by the distributor.

However, this will have major impact on the IFAs, as their margins are likely to take a major blow. But several fund houses have already started to promise an upfront commission of 2% to the distributors. Sabapathy Iyer, CEO of JR Laddha Financial, a distribution house, in Mumbai said, ?How long are the fund houses going to pay the upfront commission? In the long run, only those who provide better service to the investor and have maintained a cordial relationship with their investors will survive.?

In the month of June, assets under management (AUM) stood at Rs 6,70,993.13 crore, a rise of 4.98% or Rs 31,863.31 crore compared to Rs 6,39,129.81 crore in May. Some of the large distributor houses have already removed transaction fees for the retail investors, HNI mutual funds customers, for the first few months.