Mutual Fund Agent Commission Structure

Mutual Fund Agent Commission is nothing but the commission that an Agent gets from the investors and AMCs(Asset Management companies).

It is very important to understand the different rates of commissions that Mutual fund agents earn. Customers have the right to ask about it and advice the agents gave, they have the responsibility of providing because they earn money from the agents’ investments. For that matter, if you want to know more about the mutual fund investments you can visit us at Finbucket.com

A mutual funds agent’s commission includes 4 parts: a commission from the client, upfront commission, trail commission and One-time transaction charge.

Commission from client: 

Agent charges a commission from a client for providing his services and this amount is generally .5% to 2% of the investment. The client can negotiate this commission’s worth on the quality of advice his agent provides. this is a recurring commission and the agent gets a commission every time the client makes the investment.

For example, if a person invests Rs 10,0000 every month and his agent’s commission is 1%, the Agent gets Rs 1000 every month as a part of the commission from a client.

Upfront Commission:

These commission agents get from the mutual fund companies/asset management companies in the first year and it is included in the total expense of mutual funds. you will not feel the heat of this expense but indirectly you are paying for it.your mutual agent will receive it whenever you invest newly. this commission varies from one company to another and from product to product, high in ELSS funds (around 4.5% to 1%), equity schemes (around 0.5% to 2.5%) and low in debt funds (around 0.2% to 0.8%).

Trail Commission: 

This commission is usually undisclosed by the investors but is it a most important part of a mutual fund agent’s commission and it is the primary source of earning for mutual funds agents. This commission structure range from 0.5% to 1% based on the mutual fund companies and products.it is paid from your total net worth or asset under management. This will be paid to your agents even if you do not invest also but if your investment stayed without withdrawal.

Suppose around 100 investors are there under the scheme and including all of them he has asset under management is around Rs.5 Crores and the trail commission is 0.5 %, the company will be paying an agent Rs 25,0000 annually, the amount coming from the investor’s money.

If next year due to bad market condition or because of some clients who have withdrawn their money, total asset under him depreciated to Rs.2.5 Cr then he will receive Rs.1,25,000 in that year. But at the same time due to additional investment by existing clients, it has grown to Rs.10 Cr then his next year commission will be Rs.5,00,000.

This trial commission structure is actually created with a good intention to protect investors by giving them good fund selection. If agents advice will prove to be good and investors money grows then both agents and investor will get profit otherwise both will be loose.

One time transaction charge:

This is fixed as Rs.100 for existing investors and Rs.150 for new investors of mutual fund. This cost will be deducted from the investors invested amount. The investor can neglect this cost as it is not high. This is deducted from the investor account either one time if the investor has invested the lump sum or Rs 25 per month if you invested through SIP.

For an example of mutual fund Agent earning, Consider upfront as 0.5% and trial 0.5%. But excluding the fee they charge as of now. Also, Considered equity mutual fund investment with a growth of 12%.

so Mutual Fund Agent Earnings will be as:

No. of yearsInvestmentTotal Asset Under Managment@12%Upfront CommissionTrial CommissionTotal Commission
1Rs.1,00,000NILRs.500NILRs.500
2Rs.1,00,000Rs.1,12,000Rs.500Rs.560Rs.1,060
3Rs.1,00,000Rs.2,37,440Rs.500Rs.1,187Rs.1,687
4Rs.1,00,000Rs.3,77,932Rs.500Rs.1,889Rs.2,389
5Rs.1,00,000Rs.5,35,284Rs.500Rs.2,676Rs.3,176
6Rs.1,00,000Rs.7,11,518Rs.500Rs.3,557Rs.4,057
7Rs.1,00,000Rs.9,08,901Rs.500Rs.4,544Rs.5,044
8Rs.1,00,000Rs.11,29,969Rs.500Rs.5,649Rs.6,149
9Rs.1,00,000Rs.13,77,565Rs.500Rs.6,887Rs.7,387
10Rs.1,00,000Rs.16,54,873Rs.500Rs.8,274Rs.8,774
11Rs.1,00,000Rs.19,65,548Rs.500Rs.9,827Rs.10,327
12Rs.1,00,000Rs.23,13,313Rs.500Rs.11,566Rs.12,066
13Rs.1,00,000Rs.27,02,910Rs.500Rs.13,514Rs.14,014
14Rs.1,00,000Rs.31,39,260Rs.500Rs.15,696Rs.16,196
15Rs.1,00,000Rs.36,27,971Rs.500Rs.18,139Rs.18,639

Total earnings of Mutual Fund Agent will be Rs. 1,10,972

From the above table you can see that the Mutual Fund Agent’s earnings are low at beginning but drastically improved as AUM(Asset Under Managment)grows.
 


 
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By | 2018-12-17T12:42:26+00:00 July 9th, 2018|Mutual Funds|0 Comments

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