MF News MFDs need to tell clients: ‘Regular plans involve payment of commission to MFDs’

MFDs need to tell clients: ‘Regular plans involve payment of commission to MFDs’

Distributors facilitating online transaction will have to explicitly mention that regular plans which they recommend comprise payment of commission to MFDs.

Nishant Patnaik Apr 13, 2022

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Next time when your clients execute transaction on mutual funds recommended by you on digital platforms, they can read a message that ‘Regular plans involves payments of commission to MFDs’.

AMFI has revised the code of conduct for mutual fund distributors in which it has asked MFDs offering online transactions to explicitly tell their clients that regular plans pay commission to MFDs.

Further, AMFI has also asked MFDs facilitating digital transactions to prominently display their commission structure from different competing schemes across fund houses through a hyperlink.

AMFI said, “According to SEBI, MFDs cannot deal in direct plans. MFDs shall ensure that on any digital platform provided by MFD for offering investment facility to investor, it is categorically disclosed that the scheme the investor is subscribing to is of ‘Regular Plan’ which involves payment of commission to MFD. The link for the rate of commission received or receivable by the MFD for the different competing schemes of various Mutual Funds shall be prominently displayed on the platform indicating the same as a hyperlink. Further, a link to the AMFI Code of Conduct for Mutual Fund Distributors scheme offer documents (SID/SAI/KIM) shall also be prominently displayed on the concerned page.”

In addition, AMFI has asked MFDs using digital platforms to onboard, facilitate transaction and provide services to put in place cyber security measures to maintain confidentiality of digital data.

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48 Comments

Dinesh Singh Kushwaha · 2 years ago `

Dear AMFI,
I have tried this many times before your sincere advice to MFDs but investors don't believe and ask how can an MFD work with too less commission. They have a fair idea about the commission earned by an Insurance agent, post office small savings agents but don't believe that even the full yearly commission is lesser than a post office small saving agent.
I do educate specially those prospective clients who are Investing in Direct Schemes of Mutual Funds. I tell them that the services they will get from us like updation of data like nominee, bank, mobile, email, consolidation of folios and other regulatory requirements imposed by SEBI might be time consuming and one might skip the required changes because of lack of knowledge or time. In just 2 years as an MFD I have helped many clients to recover their investment which was virtually forgotten/lost due to non-updation of email ID, Mobile No and PAN. Even RTA staff was not helping them.
We are getting too less commission that printing cost of statement is more for the investor who has invested 10K.

We are also not able to show the reason why our commission is lesser than the difference between expense ratios of regular and direct scheme. We are also not able to show any official link or page of AMCs/AMFI to show the commission.

ANURAG DUREHA · 2 years ago `

While promoting DIRECT PLANS to the core, SEBI is forgetting the purpose and concept of DIRECT PLANS. These plans are meant for investors who understand thoroughly what Mutual Funds are, why there are various types of schemes, which scheme will suit an investor and so on.
While it may be a good idea to disclose commissions on Regular Plans, it should not give an impression to the innocent (less-financially-literate) investors, who consider price as the major deciding factor, that Direct Plans are better than Regular Plans.
SEBI's guidelines are like telling a patient that better buy medicines DIRECTLY from the chemist so that s/he saves on consultation fees of a doctor. Is it safe ? Is SEBI really worried about the safety of the investors by giving wrong impression to them ?

Veena KAPOOR · 2 years ago `

Good Initiate from SEBI.. To show commission to investor...

Just a Request please ASK All other disctirbutor to show there commission like

BANKs /NBFC will show Commission. ( on third Pary Products )
Car / Vehilcle Dealers to Show Commission.
All Electonics Gadege to Clearly show the commission.
School & Hospital has to show the margins .
All Restaurants has to show commissions.

Above all these doing lots of cash transcation also.( hiding income from dept. )

100% Bank Transfer income will not able to hide any income from Income tax department . after that SEBI is very Harh on MFD as we are basically hepling clients for Future financials plannning. Guiding for long term investment. We need your support to grow and make india as Financials rich country .

Sanjeev C. Bhatkar · 2 years ago

True.

ASHISH KUMAR · 2 years ago `

AMFI AND SEBI WANTS THAT EVERY MFD SHOULD QUIT THIS INDUSTRY

Sanjeev C. Bhatkar · 2 years ago

Yes, certainly, their promotional ads also show leading cticketers like Bumra and others insisying investers yo avoid mfds.

Sanjeev C. Bhatkar · 2 years ago `

Who will reveal about how different entities like ET money, Grow more, and several others are earning money through Apps ? And how about Direct channel usex by mf amcs ? Are they not earning? Snd that yoo by making investers visit their office personally with service related issues ?

Gururajan · 2 years ago `

When clients invest in mutual funds online, why should the MF website should show the regular plan option in the first place.
The mutual funds must stop showing regular plan options. That should be reserved for MFDs when they meet and get business from clients in person.

Devendra Kumar Patel · 2 years ago `

MFDs ko band karo yaar (samay rhte hm bhi dusara dhandha dekh le), tumhara ( AMFI/SEBI) sar darad bhi khatam.
"N rahe bans n rhe bansuri".

SANDEEP KUMAR · 2 years ago `

People need to understand that there are no free lunches in life. Free / Direct Mutual fund platforms is also a business with a revenue model in place. Its just that these platforms earn by pay and play model and also by selling client data and cross selling and also no one knows that these so called free platforms might also start charging additional fees for use of their platform similar to companies in the western countries where it is already happening. Coming to the commission disclosure for MFD, yes we can disclose to the client, how we get paid for our services rather then telling them, how much we are paid.

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