Reforms as a result of the fund scandal are likely to cost mutual fund companies billions of dollars in revenue, two Merrill Lynch predict, Reuters reports. Firms will see their profits fall as they abandon soft dollars and directed brokerage, lower fees and beef up compliance to meet new SEC requirements, analysts Guy Moszkowski and Cynthia Mayer wrote in a report issued Tuesday.

In a "worst-case scenario," fund companies could see their revenues shrink between $1.6 billion and $5.5 billion. Contributing to that would be $200 million in legal fees and compliance costs, $700 million a year in lost revenue from changes to sales practices and $500 million a year in the elimination of 12b-1 fees.

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