Glide Invest FAQ: How does my broker make money when I invest in Regular plans?

How does my broker or agent make money when I invest in Regular plans?

Financial agents offer you advice on mutual funds for free. But there is no free lunch.  They get paid from the expense ratio charged to you. A regular plan expense ratio will contain the commission to be paid to the agents by the AMC and the payments occur quarterly. For e.g. Motilal Oswal Nifty 50 Index fund – Regular Plan has an annual expense ratio of 0.5%, meaning the fund uses 0.5% of the money invested by you to pay for expenses related to the funds, which include distributor fees.

Furthermore, this commission is paid every quarter on the current Assets Under Management (AUM) and not on initial investment. For e.g. if you had invested say Rs. 10 lac at the start of year 1, and at end of first year, you have Rs. 12 lac, your broker gets a commission of 0.5% * 12,00,000 = Rs. 6800. 

Now if your investment value at the end of next year  is say Rs. 15 lac, then the broker gets 0.5% * 15,00,000 = Rs. 7500.

He/she gets the commission despite you making any new investment in that fund. Even if you stop making new investments, or stop dealing with that broker, but leave the money invested in the funds invested through him/her, he/she still gets commission due to his/her AMFI Registration Number (AMR) code being attached to your investment.

    • Related Articles

    • What are regular plans and direct plans?

      All mutual fund schemes offer two plans - Direct and Regular. In a Direct Plan, an investor has to invest directly with the AMC or with an online robo-advisory platform, with no distributor to facilitate the transaction and no investment advice.  ...
    • How can I find out if I have invested in a regular plan or direct plan?

      Investments made through a financial intermediary like a bank or a broker are usually regular plans. If you have invested through a financial planner and he/she has advised you on what to buy, done all the paperwork himself/herself and has collected ...
    • How does investing through Glide Invest mean more returns?

      At Glide Invest, we only sell direct plans of mutual funds. Regular plans contain a distribution commission that is paid by the Fund to the distributor or broker who sold you that plan. This forms the part of the fund expense ratio and it is deducted ...
    • Funds I want to invest in are missing. How do I invest in them?

      At Glide Invest, we plan to make the direct plans of mutual funds from all 41 fund houses available on our platform.  We are still in the process of signing up with various fund houses.  Please be patient while our team works tirelessly to get every ...
    • Why should I invest through Glide Invest?

      Glide Invest provides a unified platform through which you can invest across Mutual Fund houses, by registering only once.  You get a unified dashboard to review and track the performance of your investments.  We also provide risk profile analysis ...