Types of Commission for Mutual Fund Advisors

Mutual fund distributors don't have a fixed income like other professionals. Instead, their commission depends on three main things: the company managing the assets, the specific mutual fund, and the city where the clients are from.

Let’s understand the types of Commission for Mutual Fund Advisors-

Trail Commission

Trail commissions are designed to reward mutual fund distributors for bringing in clients from cities outside the top thirty cities in India, as identified by the Associations of Mutual Funds in India (AMFI).

There are two types of trail commissions:

T-30 cities: These include the top 30 cities in India with the most mutual fund investors, such as Mumbai, Kolkata, Bengaluru, Pune, and Chennai. They can normally have a commission rate ranging from 0.2% to 2% depending on the fund house and type of fund.

B-30 cities: These are cities outside the top 30, which typically have fewer investors. Mutual fund houses actively seek clients from these cities to diversify their client base.

For clients from B-30 cities, distributors receive additional incentives known as Master B-30 incentives. These incentives are in addition to the regular commission of 0.2% to 2% and are provided for investments made during the first year.

Upfront Commission

Upfront commissions are paid to distributors when investors buy mutual fund products. This fee is taken out from the investor's investment upfront, typically ranging from 3% to 5% of the invested amount.

Eligibility to get a commission

In India, people or businesses can earn commissions from mutual funds by registering with the Association of Mutual Funds in India (AMFI) as mutual fund distributors. To qualify, they need to meet AMFI's criteria, which usually involve finishing certification courses, having a certain level of education, and meeting registration standards.