One of our readers wrote to us with this query
Can I get upfront commission in SIPs? If yes, what is the commission structure?
Rahul Soni via email
Dear Rahul,
Fund houses can do upfronting of trail commission on SIPs subject to fulfilment of these criteria
- Upfronting of trail commission is allowed only for first time investor based on PAN
- Fund houses can pay 1% upfronting on SIP of up to Rs.5000 for a maximum period of 3 years. For instance, if a first time investor starts SIP of Rs.5000 for three years, distributors will get close to Rs.1800 as upfronting of trail commission
- Fund houses can claw back such a commission on a pro-rata basis from distributors if investors discontinue SIP for which the commission is paid
- SEBI will take appropriate action if it finds irregularity in this practice
However, it is better to stick to all trail model as distributors get commission on mark to market basis. If a fund does well, distributors will get healthy commission compared to what he gets through upfronting of trail commission.
