Over the past few weeks I have been interacting with large numbers of mutual fund advisers around the country. These interactions have all been part of large events where a broad spectrum of advisers was present.

It goes without saying that almost every adviser says his business has been, for all practical purposes, destroyed by the abolition of entry load in mutual fund investment by the Securities and Exchange Board of India (Sebi).

These protestations are understandable. Few businesses can take the sudden revenue reduction of 50 per cent or more without a lot of pain.

Moreover, many advisers are relatively small businesses run by the business-owner with a handful of employees.

However, I strongly felt that mentally, most advisers are modeling the future of their businesses without imagining the kind of growth that is possible.

To me, the situation in the mutual fund business is similar to that in the stock brokerage business 10 years ago or in the telecom business at the same time.

To all intents and appearances, India is set for years of economic growth. Moreover, a large chunk of our urban population are young white collar workers who are going to come into the saving and investing stage of their lives over the next decade or so.

At this juncture, the kind of reforms that have been implemented by Sebi over the last year should be seen as making mutual funds an investment product that is far more suitable for building a good business around. Let me explain what I mean by a ‘good business’. It means a business that offers a product that is clean and honest and none of whose characteristics have to be fudged or hidden.

Say what you may, but this is not so common in financial products.

Look at the unit-linked insurance plans or Ulips. Today, every Ulip salesman in the country dreads finding a knowledgeable customers who asks intelligent questions.

It’s a product that has fallen to such depths of anti-investor structure that it can only be sold to customers who are not thinking for themselves.

There may be no shortage of such customers today, but it’s not a good way of doing business for a small advisory, which relies on long-term personal relationships and the word of mouth.

In sharp contrast, the mutual fund business has a basis for fair and open long-term dealing with customers.

Whether it is sales commissions (which don’t exist any more), or funds sticking to their mandate, or transparency in the information that is put out by fund houses, there is nothing that even the most nitpicking investor can point a finger at.

Not even with the structure of the fund business. The biggest source of misselling in the fund industry — new fund offers being floated with flimsy differentiation from older ones — has now been completely choked off through regulatory stance.

For mutual fund investors, it is the time to be confident of the product class they are choosing and that means for fund advisors who wish to take up this opportunity, it could be the end of something, yet the beginning of something bigger.

(Dhirendra Kumar is CEO of Value Research India. His column

appears every Monday)