One of our readers wrote to us with this query:
I am an individual mutual fund distributor. Currently, my entire assets under management is held physically. However, I would like to digitalize my assets under advisory (AUA) by switching existing clients’ folios to demat with a national distributor.
I understand that I have to share commission with the national distributor if I transfer my assets. However, I would like to understand if such a sharing happens with the entire assets or just incremental business.
Regards,
John k
Hi John,
Thanks for writing to us. Hope you and family is healthy and safe!
You can do both - Transfer your assets to ND or do incremental business with the ND and keep the existing assets intact.
AMFI has done away with partial transfer of assets other than transfer of AUM from national distributors. So, if you transfer your assets to a national distributor, you need to transfer your entire assets.
You have to ensure that your ARN is valid and you are KYD complaint before transferring your assets; this applies to the new distributor who receives such assets as well.
Now, coming to the brokerage part, the new distributor will get trail commission on a prospective basis on the valid assets i.e. trail commission rate would be lower of commission on old ARN and new ARN. Since NDs have a better command on brokerage, your trail commission will be largely similar to what you were getting from AMCs.
Remember that once you transfer your assets, ND will disburse your trail commission after factoring in their share.
Another option for you is do incremental business with the ND and keep the existing business intact. In this option, AMCs will pay trail commission on your previous assets.
I hope we have resolved your query. You can write to us if you need any clarity.
Regards,
Team Cafemutual
