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A report released by Motilal Oswal Financial Services says that MFDs should anticipate a reduction of 10-20% in their commission income due to the expected rationalisation of TER.
The report said, “As the regulator is expected to decrease the TER that AMCs can levy on schemes, distributors anticipate a reduction of around 10-20% in commission rates.”
However, the report cautioned AMCs that any further cuts beyond 10-20% would be detrimental to the growth of industry in the long term. Also, these cuts could drive consolidation among distributors (some of it already happening).
The report says that currently, MFDs make Rs.70 per annum on SIP of Rs.2000.
Further, the report says that many fund houses have reduced commission on NFOs by 5-10 bps over the past few months. Also, there is no significant change in commission structure of existing schemes. However, a few small fund houses have doled out higher payouts that too occasionally, says the report.
