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1Fix the driver behind crashes, sound loss and screen glitches2Clear out junk files and repair common Windows errors3Scan for outdated or missing drivers - takes under a minuteIn India, a mutual fund distributor and a SEBI-registered investment adviser are paid through different channels. An asset-management company (AMC) generally pays a distributor from scheme expenses, so the investor bears that cost indirectly through a regular plan’s expense ratio. An investment adviser (IA) charges the client directly and cannot take commission from product issuers. A service described as “free advice” from a distributor can therefore still have a cost embedded in the fund. This is a consumer-cost explainer, not personal financial advice; rules and fund disclosures can change, so verify the current documents for your scheme and adviser.
The two compensation models at a glance
| Who you deal with | Who normally pays | Where the cost appears | What to verify |
|---|---|---|---|
| Mutual fund distributor (MFD) | AMC, from scheme expenses within regulatory limits | Usually in the recurring expenses and TER of a regular plan, rather than a separate invoice | Regular-versus-direct TER, current scheme disclosures and your half-yearly CAS |
| SEBI-registered investment adviser (IA) | Client directly | Invoice, standing instruction or other payment method set out in the signed agreement | SEBI registration, fee mode, amount, billing frequency, services and household coverage |
| Distributor service fee (if separately agreed) | Client directly | Separate fee arrangement, distinct from AMC-paid commission | Written scope, amount, taxes and whether it is in addition to plan expenses |
SEBI’s investor education distinguishes MFDs, who earn commissions from mutual-fund sales, from IAs, who charge clients directly and provide recommendations under an adviser framework. AMFI describes the distributor route as commission paid directly by the AMC within the expense limits in Regulation 52 of the SEBI Mutual Funds Regulations. Read the explanations from SEBI and AMFI alongside your own account documents.
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What a mutual fund distributor charges
AMC-paid commission is built into a regular plan
When you buy through a distributor, the AMC pays commission under the scheme’s permitted expense structure. You normally do not receive a monthly bill labelled “distribution commission.” Instead, the cost is part of the scheme’s ongoing expenses and is reflected in the plan’s total expense ratio (TER). Because expenses reduce the NAV or the return left for investors, you pay indirectly through the investment’s performance.
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Fix the driver behind crashes, sound loss and screen glitchesFind Drivers →Repair Windows errors before they cause bigger problemsFix Now →The exact compensation is not one universal percentage for the Indian market. It can vary by scheme, product arrangement and the holdings that generate the commission. The official material used for this explainer does not establish a current, dated industry-wide “typical” rate, so quoting an average would be misleading.
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Regular and direct plans are not the same cost option
A regular plan includes distribution expenses. A direct plan is bought from the fund house without a distributor and does not pay or charge commission for distribution of units. SEBI says the direct-plan TER is lower to the extent of distribution expenses or commission charged in the regular plan, although the overall TER also includes other permitted scheme costs. Compare the same scheme’s regular and direct options, not two unrelated funds. SEBI’s explanation is available at Regular and Direct Mutual Funds.
The difference compounds over time because a lower expense leaves more of each period’s return invested. It does not mean a direct plan is a different portfolio or that it guarantees a higher return; market performance, taxes, exit loads and other expenses still matter.
Your CAS can show the actual gross commission
AMFI says the half-yearly consolidated account statement (CAS) for the September and March half-years shows the gross AMC or mutual-fund commission in absolute terms against your total investment in each scheme. That figure is more useful than an internet average because it relates to your holdings. “Gross” means it does not deduct the distributor’s own operating costs. Check the statement for the relevant half-year and match each amount to the scheme and period shown.
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A distributor may also agree to a separate client-paid fee
AMFI notes that an investor may choose to pay a distributor for services. Such a payment is separate from the standard AMC-paid commission and should not be confused with the TER. Ask for the service scope, amount, billing dates, taxes and cancellation terms in writing. Add that fee to your total cost when comparing a regular-plan route with a direct plan or an IA.
What a SEBI-registered investment adviser charges
Two permitted fee modes and their ceilings
SEBI’s June 2025 IA-fee framework gives advisers two fee modes:
- AUA-based fee: up to 2.5% of assets under advice (AUA) per annum per client family.
- Fixed fee: up to ₹1,51,000 per annum per client family.
These are regulatory maximums, not the typical price or a mandatory quote. The framework says the total fee cannot exceed the higher of the fixed-fee cap or 2.5% of AUA per annum per family. The fixed-fee limit is revised every three years by the Investment Adviser Administration and Supervisory Body (IAASB) using the Cost Inflation Index after consultation with SEBI. The framework also permits changing fee mode at any time. Read the June 2025 SEBI document at SEBI’s IA-fee framework for the operative wording.
Your agreement controls the practical price
An adviser can quote less than the ceiling and structure payment monthly, quarterly, annually or in another agreed schedule. The agreement should state whether the fee is fixed or AUA-based, how AUA is measured, which family members are covered, what services are included, when invoices are due, how taxes are handled and how either party can terminate. Actual quoted fees and service levels are contractual matters; do not infer a market average from SEBI’s maximum.
SEBI’s material says advice or a fee should not begin until the client signs the agreement and receives a copy. Confirm the adviser’s current SEBI registration before paying and retain the signed document, invoices and payment records.
An IA cannot replace the fee with product commission
The IA model is client-paid rather than issuer-paid. That separation is intended to reduce the incentive to recommend a product because it pays a higher commission. It does not guarantee that advice will outperform a distributor’s service or that it will cost less. The relevant comparison is the actual adviser fee plus the TER of the recommended plan.
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How to compare the total cost fairly
Use the same investment and time horizon
Start with the same scheme, amount, holding period and expected return assumptions. Compare a regular plan with its matching direct plan, then add any separately negotiated service fee. Comparing a direct-plan TER with an unrelated fund’s regular-plan TER can produce a false saving.
| Cost question | Distributor route | Adviser route |
|---|---|---|
| Compensation source | AMC commission funded through scheme expenses; possible separate distributor service fee | Client-paid fee under the adviser agreement; no product-issuer commission |
| Plan choice | Usually a regular plan when the distributor is recorded on the folio | Could recommend direct or regular plans, depending on the service and arrangement |
| Key document | Half-yearly CAS and current scheme TER disclosures | SEBI registration details and signed fee agreement |
| Rate to compare | Regular-plan TER versus the same scheme’s direct-plan TER | Actual quoted fee, not the regulatory ceiling, plus the plan TER |
SEBI’s simplified illustration
SEBI presents a hypothetical example for ₹1,00,000 invested in a fund earning 10% annually. In its regular-plan illustration, a 1.5% expense ratio leaves an effective 8.5% return; in its direct-plan illustration, a 0.5% expense ratio leaves 9.5%. This is a simplified educational example, not a forecast for any particular fund and not a promised return. See SEBI’s regular/direct-plan page.
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Calculate household cost, not just the headline fee
- Write down the regular and direct TER for the same scheme and the date of each disclosure.
- Record any distributor service fee separately from the TER.
- For an IA, record the agreed fixed amount or AUA percentage, the AUA measurement date and the billing frequency.
- Estimate the rupee cost over your intended holding period, remembering that expenses reduce the amount that remains invested.
- Check whether the adviser covers one person or the entire client family and whether reviews, financial planning, implementation help or reporting are included.
- Compare the combined totals with the value of the service you will actually use; a lower fee alone does not establish better advice.
Transaction charges: why old ₹150 and ₹100 figures need caution
AMFI’s investor guidance page, accessed October 13, 2026, still describes a transaction charge of ₹150 for a new investor and ₹100 for an existing investor for each qualifying ₹10,000 subscription when the distributor opted in. Those figures should not be presented as a blanket current charge. SEBI issued a later circular titled “Transaction charges paid to Mutual Fund Distributors” on August 8, 2025, and a subsequent master-circular compilation describes deletion of the earlier provisions allowing AMC-paid transaction charges for a distributor bringing a ₹10,000 minimum subscription.
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Before treating any transaction charge as payable, check the operative SEBI rule, the scheme’s current documents and the channel through which the order is placed. The later circular is at SEBI’s August 8, 2025 notice; the archived compilation is available from NSE’s copy of the Mutual Fund Master Circular extract. Do not assume the older ₹150/₹100 wording applies to every order today.
Which rules and disclosures are current?
Mutual-fund costs are time-sensitive. SEBI’s regulations index lists the Mutual Funds Regulations, 2026, last amended July 7, 2026, and the Investment Advisers Regulations, 2013, last amended November 25, 2025. Use the current index at SEBI’s regulations list when checking a present-day requirement.
Some scheme information documents still quote earlier Regulation 52 numbering or legacy additional-expense provisions. For example, a December 2025 scheme document notes removal of additional above expenses after an October 31, 2025 amendment. Such historical wording is not a substitute for the latest TER disclosure or regulation. Check the current factsheet, scheme information document, account statement and the AMC’s expense disclosure before relying on a number. A scheme-specific example is available in The Wealth Company Mutual Fund Scheme Information Document.
A practical checklist before you invest or hire advice
- Confirm whether the folio is in a regular or direct plan.
- Find the latest TER for that exact scheme and plan.
- Ask the distributor whether any client-paid service fee is separate from AMC commission.
- Read the half-yearly CAS and identify the gross commission shown for each scheme.
- For an IA, verify current SEBI registration and obtain the signed agreement before advice or payment starts.
- Check the fee mode, AUA definition, family coverage, billing schedule, taxes, services and termination terms.
- Do not use a regulatory maximum as evidence of a typical market price.
- Recheck transaction-charge rules instead of relying on older ₹150/₹100 explanations.
- Record the date and source of every TER or fee figure because disclosures and regulations can be amended.
What the numbers mean for your decision
A distributor may be appropriate when you value ongoing help with implementation, paperwork, rebalancing or family servicing and accept the cost embedded in a regular plan. An IA may be appropriate when you want a separately contracted planning service and prefer to see its fee directly. Neither label by itself proves lower cost, better performance or unbiased outcomes. Compare the actual plan TER, any distributor service fee and the adviser’s agreed fee for the services you will use, then verify the current documents before investing.
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