Upfront commision to distributer from MF
POSTED BY ON December 8, 2010 12:40 pm COMMENTS (4)
Hi All,
I had gone thro’ the following information.
“The commission structures for selling equity mutual fund (MF) schemes are back on the high levels as those witnessed during the pre-entry load ban regime. With the equity markets buoyant, mutual fund houses are now offering more commissions to their distributors in order to survive in the market.
For instance, for a three-year monthly SIP of 
10,000, upfront commission of 8,000 is given, which is equivalent to 2.25% of total investment. For five-year SIPs, it goes up to 22,000 or 3.75% of investment committed.”
Why do the MF are giving so much of commission to distributers. I have started investing in MF by own and not using any of distributer channels but i still in loss even after Entry load is removed. What’s your views?
Regards
Irshad
@Irshad
The amount that is given upfront actually includes the Trail commission. So the distributor gets the upfront payment and no trail commission for rest of the period. I had heard about this for ELSS, and some other non-ELSS funds.
The best way to curb this thing is not to invest in such schemes, if these schemes have not performed well. If these schemes are the best of the lot, I do not mind the AMC paying anything to anyone! Let everybody make money.
The equity MFs cannot charge more than 2.5% per annum. So you must only concentrate on the 97.5% part. If the AMCs are giving money out of their pockets, that is their headache, not yours.
Select good MFs which have performed well, have independent unbiased opinions from different people/websites and then invest in them. Investing in a scheme just because one particular agent has advised you maybe suboptimal.
Ramesh
@Anand.
I received a news letter from PersonalFn. I hope they were distributers once and have a advisory solution. They also have a AMC (Quantum) i guess.
@Manish
SEBI has removed the Entry load to make investors rich and not distributors to earn money UPFRONT. I as a investor will put money and wait for to grow. All gain and loss should be mine. I guess we as investor need to have a platform to raise these issues with AMFI and SEBI. Correct me if i am wrong.
irs
I am not sure if you can get rid of that . Upfront commissions are paid by AMC’s to distributors , the ban on only on the loads which were recovered from customers directly !
Manish
What is the source of your information ?