Banks and bank-associated brokers are the top earners in India's mutual fund distribution sector, securing an average of ₹126.6 crore in annual commissions per entity during FY2024-25. This figure significantly surpasses the earnings of fintech platforms, wealth managers, and independent financial advisors, according to an analysis by 1 Finance based on AMFI data.
The study highlights a stark concentration of commission income within the industry. A mere 1.5% of distributors, representing just 3,158 entities, captured a substantial 77.2% of the total ₹27,335-crore commission pool.
Uneven Distribution of India's Mutual Fund Earnings
India's mutual fund distribution business generated an estimated ₹27,335 crore in commissions in FY2024-25. However, the distribution of these earnings was highly skewed. Banks and their associated brokers emerged as the highest earners on a per-entity basis, while individual mutual fund distributors and smaller advisors received considerably less.
Unlike an advisory fee, mutual fund distribution commission is not directly billed to investors. Instead, it is paid from a scheme's expense ratio, which is deducted from the fund's daily Net Asset Value (NAV) before returns are calculated. This means investors in regular mutual fund plans indirectly bear the cost of distribution through the scheme's operational expenses.
Banks Lead by a Significant Margin
Despite comprising only 50 entities, banks and bank-associated brokers collectively earned ₹6,330 crore. This translates to an impressive average annual commission of ₹126.6 crore per entity. These institutions also managed the highest average Assets Under Management (AUM) at ₹17,531 crore per entity.
The report attributes this advantage primarily to banks' extensive branch networks, long-standing customer relationships, and their capacity to gather assets at scale. This allows them to significantly lower the cost of acquiring each additional rupee invested.
Wealth Managers and Fintechs
While banks led in average earnings per entity, wealth managers and corporate mutual fund distributors collectively received the largest share of the overall commission pool. This category, comprising 1,591 entities, earned ₹11,629 crore, accounting for over 42% of total commissions. The average annual commission for this group was ₹7.31 crore per distributor, with an average AUM of ₹830 crore.
Digital distribution platforms, or fintechs, are also a growing force. Forty-three fintech platforms collectively earned ₹458 crore, averaging ₹10.65 crore in annual commission per entity. They managed an average AUM of ₹1,351 crore.
Individual Distributors Face Challenges
The disparity becomes particularly evident when examining individual mutual fund distributors (MFDs). The 1,474 AMFI-disclosed individual MFDs earned ₹2,689 crore, averaging ₹1.82 crore in annual commission and managing an average AUM of ₹190 crore per distributor.
For smaller, non-disclosed distributors, the situation is even more challenging. An estimated 2.03 lakh such distributors shared ₹6,229 crore, resulting in an average annual commission of just ₹3.07 lakh each.
The Concentration of Commissions: Scale Over Regulation
The report suggests that this concentration of commissions is largely a function of scale rather than regulatory frameworks. Trail commission, which is linked to Assets Under Management, inherently favors larger institutions with broader distribution networks and greater customer reach. Independent distributors, typically building client bases through personal relationships, face higher acquisition costs and generally manage smaller asset books.
Advice for Investors
For investors, the analysis underscores the importance of understanding how their financial advisor is compensated. It recommends checking if a direct plan of the same mutual fund scheme is available and verifying whether the advisor is an AMFI-registered mutual fund distributor or a SEBI-registered investment adviser. Knowing the compensation model can help investors make more informed decisions about their investments.