Mutual Fund Distributor Commission Structure
Understand the MF Agent Commission Structure
The Mutual Fund Distributor or Agent’s Commission is nothing but the fee an agent receives from the AMCs for selling mutual fund schemes. The mutual fund distributor’s commissions vary across different mutual fund schemes and asset management companies. Each AMC has its own structure for paying commissions to distributors and has also characterized varied percentages of commissions for different categories – debt, equity, hybrid categories etc. within the range of 0.1 percent to 2 percent. The AMCs pay the commission amount based on the total AUM (Asset Under Management), which is calculated on an annual basis?(this includes SIPs for the year & lump-sum investments) and is paid to the distributors on a monthly basis. The commission payable on the scheme by the AMC is part of the mutual fund scheme’s expense ratio which also includes other costs like fund management, administration, marketing, accounting etc.?
Also, the commission structure differs across the cities.
The primary source of commissions for the mutual fund distributor includes:
Trail Commission
This commission is usually the primary source of earnings for??Mutual fund agents.?Depending upon the mutual fund schemes and AMCs, the commission structure varies from 0.1 per cent to 2 percent.
SIP additional commission (upfront)
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Some of the mutual fund companies also offer special commissions (upfront) to the mutual fund agents for selling the new?Daily SIP?investments in MF schemes. This additional commission is only paid for the first SIP amount (not on AUM).
Payout of Commissions
Commissions on mutual fund schemes are paid out to the distributors by AMCs directly into their associated bank account which was shared at the time of empanelment. The AMCs make monthly payments of commissions to the distributors based on the rates for different schemes highlighted in the “broker structure”, which is shared with the distributor.
Every month, the AMC sends information through emails to the distributors regarding the average AUM, new investments, ongoing SIPs, holdings liquidated, and other transactions under their ARN. Along with that, the document also mentions the amount of commission payable (including its break-up) by the AMC.
When a distributor receives his payout, he needs to file the GST applicable as per the information shared by the AMC. After filing GST, the distributor has to share a copy of the invoice with the fund house.
The upfront mutual fund distributor commission varies from scheme to scheme. It is typically high for ELSS (tax saving schemes), medium for equity, and lowest for debt mutual fund schemes.?
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