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I have a question regarding your answer on trailing commission. You have stated that it is possible to introduce an agent even after direct initial investment and then the trailing commission will be paid to the agent. What happens when one has made the investment directly and does not introduce any agent even after the initial investment? Will the trailing commission be charged in such a case as well? Will the commission to the agent be paid out of the income of the AMC or charged to my investment quantum?I would also like to know how the expense ratio is reflected in our account statement. Is it levied both at the time of initial investment and every year on my continuing investment? If I invest directly, does the expense ratio affect me?
- Satish Sutaria
When you invest directly and do not introduce any agent even after the initial investment, then no trail commission is paid on your investment to anyone. The trail commission is not paid out of the AMC's income but is charged from the scheme on a pooled basis. So the trail commission saved on your direct investment benefits all investors in the fund.
Coming to your other query, the expense ratio does not show in the account statement. It includes the fees and expenses for operating a scheme and is deducted from the NAV every day. Whether you invest directly or through an intermediary, the expense ratio remains unchanged.
SEBI has laid down a framework for charging the annual scheme recurring expenses. For equity funds, on the first 100 crore of the scheme's weekly average net assets, a maximum of 2.5 per cent can be charged. On the next 300 crore, the charge will not exceed 2.25 per cent. On the next 300 crore, a maximum of 2 per cent can be charged while on the balance, the upper limit is fixed at 1.75 per cent.
This article was originally published on February 06, 2009.
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