Mutual fund distributors earned ₹10,420 crores in commissions in FY 2021-2022 😮

AMFI (Association of Mutual Funds in India) just released a report on commissions earned by mutual fund distributors for 2021-2022. The commissions earned soared to over Rs.10,400 crores😯

When investing in mutual funds, there are two plans, Regular Plan and Direct Plan. When investing in a regular plan, you have to pay commissions, which can be as high as 1% yearly on the invested amount, as long as you’re invested.

If you’re investing in a direct plan, you pay no such commissions; on Coin, we offer zero commission direct mutual funds.

How does this affect you?

Here’s a look at the performance of direct and regular plans of Axis Long Term Equity Fund. Over the past 5 years, the direct plan has returned 83.49%, while the regular plan has returned 75.41%.

While the difference of 8.08% looks small, as @Bhuvan has mentioned here, you need to know that commissions compound over time. The more your corpus grows, the more you end up paying in commissions. If you’re a DIY investor, it merely makes sense to invest in regular plans.

It is important to keep the costs of your investments low. Costs are the biggest drags in the performance of your investments in the long run.

Commission earned by Mutual Fund distributors in FY 2021 - 2022

Here’s a list of the top 20 mutual fund distributors and the commissions they earned:

NJ IndiaInvest Pvt Ltd 1298.32
State Bank of India 734.69
HDFC Bank Limited 580.62
Axis Bank Limited 537.77
Prudent Corporate Advisory Services Ltd 440.91
ICICI Securities Limited 401.41
ICICI Bank Limited 355.60
Kotak Mahindra Bank Limited 252.99
ANAND RATHI WEALTH LIMITED 169.79
Citibank N.A 138.30
IIFL WEALTH PRIME LIMITED 119.20
Hongkong & Shanghai Banking Corporation Ltd. 117.48
Standard Chartered Bank 109.43
Darshan Services Private Limited 107.41
Julius Baer Wealth Advisors (India) Private Limited 100.59
Bajaj Capital Ltd. 92.43
HDFC Securities Ltd 74.76
JM Financial Services Limited 73.64
Bank Of Baroda 69.64

Over the past few years, the rate of commission earned by distributors has been enormous. Here’s a look at the charts.

I’m a new investor; what does all of this mean?

To learn everything about investing in mutual funds and financial markets in general, we always recommend you to start with Varsity.

6 Likes

Wowza…

Looks like I’m in the wrong profession.

Agents must have made a killing. Good for them

This reminds me of this…

Actually not good… If your corpus is growing and the commission is fixed fraction of that… Then this is problem of concern…
Beyond certain amount the commission should be a fixed amount and not a percentage number even with Direct Plans.

LIC agents & ULIP agents earn even more than this as they charge even more expense ratio

2 Likes

Yes. LIC agents are often thought of as losers, but people don’t realize that quite a few of them who are in the business since long, earn crores per annum. (they get hefty new policy commissions and multiple types of renewal commissions).

1 Like

I would like to present a different angle.

We all want our market to grow, by both FII and DII participation. So we need these distributors and other such departments to rope in customers. The AUM garnered from direct funds is less than regular funds. It is not the commission that is wrong but the misselling of products to customers who don’t know about capital markets, who have no idea how equity or market linked products work.

So I will not say this is a necessary evil, but I will say that if such distributors and departments are not misselling, and are guiding their customers, working with their customers’ interests in mind, without any conflict of interest, and getting paid, then I guess it is alright, if such customers agree.

I invest in direct funds. I may have invested in regular funds if I did not know anything, but I did some reading, so chose DIY route, so direct funds.

1 Like

And as in case one of my friends, they even sell policies which profits them the most. (My friend chose policy but the agent selected one which is most profitable to him. And since these LIC Agents are family or friends or acquaintances, people mostly don’t register complaints against them or their malpractice).