I am an IFA and have decided to join a large brokerage firm as their employee.
Though I am ready to transfer my existing AUM to the brokerage firm, I would like to understand what would happen to the trail commission.
I would also like to understand is there any way in which I continue to give services to my existing clients and still receive trail commission and work as a sub broker for the company.
The sender requested anonymity.
Since you are talking about transfer of AUM from an existing distributor to a new one, the new distributor has to ensure that his/her ARN is valid and he or she is KYD compliant before receiving assets. In this case, the new distributor will be your new brokerage company, which you are planning to join.
Also, do remember that you will have to transfer the entire assets. Partial transfer of assets is no longer allowed.
After you transfer your AUM to the new distributor, you will have two choices:
First, you can surrender the ARN to AMFI within 15 days of such a transfer. AMFI will then cancel the ARN and transfer the entire AUM to the new ARN.
Second, you can continue to work as a sub-distributor with the brokerage firm to whom you have transferred the assets. In this case, you will not require surrendering the ARN with AMFI provided you cannot do fresh business after transferring assets.
The new distributor i.e. your brokerage company will get trail commission on a prospective basis on valid assets. The trail commission rate would be the lower of commission on old ARN and new ARN.
Now it will be a commercial decision between you and your main broker on what basis you would share the trail commission.
On the other hand, if your clients change the ARN code i.e. from your ARN to the main broker on their own, there will be no trail commission on such a transaction. The trail commission so generated would go to IAP corpus.
