With the banning of entry loads charged by mutual funds in India, the Securities and Exchange Board of India (Sebi) changed the operations’ equation for many. After the initial reaction of shock and awe, the industry players have started to come to terms with the new reality and gearing up to meet the challenge.

After putting their heads together, fund managers have started to look at several options to beef up distribution and many have started to turn to online technologies. The emergence of online platforms for independent financial advisors (IFAs) seems to be one of the favoured solutions.

An online mutual fund platform offers a variety of services to the IFAs and distributors. Right from research, training and education to creating customised solutions, and also product details. Distributors and IFAs wanting to offer a complete range of solutions to the investors can now use the services of the online platforms and enhance their skill levels and thereby the service offered.

Online mutual fund platform started by players like Techprocess solutions, IFAN by ING and iFAST are attracting numbers of distributors or IFAs, which were either unhappy with the market regulator’s ruling or had stopped selling the mutual fund products after the ban.

“We are adding over 8-10 large distributors every month after the ban on entry load came in to effect. This online platform has reduced the overall cost of the distributors, they can save the cost of collection of forms, filing it and then sending to the fund house,” says Bikramjit Sen, CEO of Techprocess solutions, which provides online platform to the distributors. Going forward, the online platform will provide easy access to investors as well as distributors and reduce costs, improve efficiency and save time.

Apart from Techprocess, iFAST also has started providing online platform to the retail investors in September. Earlier they had launched online business-to-business platform, which offered integrated mutual fund products and services to IFAs and distributors. Also several asset management companies and broking houses have started online transaction facility for their clients.

Players in the industry are also keenly awaiting the launch of common platform by the Association of Mutual Funds in India (Amfi), which is likely to be launched in March, 2010. However, the big question here is, do we genuinely need an online platform to attract numbers of investors in the semi-urban areas of the country?

“All the transactions by the investors will be faster and will provide a wider reach to investors. Investors will be able to access all the information under one roof and will reduce lot of paper work for the distributors,” says, AP Kurian, chairman of Amfi.

However, sections in the mutual fund industry believe that the online platform will not benefit the investor in tier-II and tier-III cities of the country. Dhirendra Kumar, CEO of Valueresearch online, says, “Finally this online platforms will provide more information to the investors and distributors and the online platforms will be helpful to the industry as well. However, the only shortcoming of the online platforms is that it will be very difficult to convince the rural investor to do online transaction, as still many investors prefer individual attention.”

Steadily mutual fund industry is realising that providing wide-range of services to the investors as well as distributors will eventually lead to further penetration of mutual funds in the country.

The iFAST platform intends to act as a link between the asset management companies (AMC) and the IFAs to offer them end-to-end investment management solutions including investment administration, research, investment training, IT services and back-office functions. Currently, they have over 200 advisors or distributors with them across Mumbai, Pune, Ahmedabad, Bangalore and Chennai. They will also add Delhi and Kolkata into the distributors’ list shortly.

“We have been receiving quite an encouraging response from the retail clients. Also we are not charging anything to the retail investor if they trade through our platform,” says Rajesh Krishnamoorthy, MD, iFAST Financial India Pvt Ltd.

The site focuses on providing in-depth and updated fund-related information and research, and is known to feature exclusive interviews with international and national financial market experts. The research team also publishes a semi-annual list of recommended funds and will soon publish recommended portfolios for investors across risk appetite levels.

iFAST earns its revenue from the upfront commission and trail commission given to them by fund houses. Currently they receive 50-75 basis point as an upfront and trail commission. However, investors will not pay any fee to the platform for its use. All payments for purchases are to be made online through a payment gateway, and customers are free to choose from as many as 13 leading banks from which they can transact.

In June, the market regulator had come out with the order to ban the entry load and empower the investors in mutual funds by way of more transparency in the loads borne by the investor so that the investor can take informed investment decisions. Earlier investors used to pay an entry load of 2.25%.

Later on August 7, Sebi came out with other order stating parity among all classes of unit holders, and was decided that no distinction among unit holders should be made based on the amount of subscription while charging exit loads. As it was observed that the mutual funds are making distinction between the unit holders by charging differential exit loads based on the amount of subscription.

Several distributors as well as IFA had stopped selling the mutual fund and had instead started selling other products like insurance to the investors. However slowly things are changing and once again distributors have started selling the funds.

Some of the players are now waiting to see how the Amfi’s platform will shape up. “It is not right to comment at this stage, as we are no aware how the platform is likely to develop. Once the platform starts operating we will chalk out the future plans,” added Sen.

Jaideep Bhattacharya, chief marketing officer of UTI Mutual Fund and also the member of Amfi’s advisory committee, said, “Once the online platform starts, it will be very useful for the new investors to invest in mutual fund as the procedure to invest in various mutual funds schemes will be simple. It will also have common application form for different mutual fund schemes and investors need not to fill different forms for other fund houses schemes.”

Once the online platform is launched and is accepted by investors as well as the distributors and IFAs, Indian mutual fund industry will witness one of the biggest change in its history.