Who earns the most from your mutual fund? Banks beat fintechs, independent advisors trail

India's mutual fund distribution business generated an estimated ₹27,335 crore in commissions during FY2024-25, but the earnings were far from evenly distributed. Banks and bank-associated brokers emerged as the highest earners on a per-entity basis, while independent mutual fund distributors and smaller advisers received only a fraction of those amounts, according to an analysis by 1 Finance Magazine based on commission disclosures published by the Association of Mutual Funds in India (AMFI).

The study estimates that 77.2% of the industry's commission pool, or ₹21,106 crore, went to just 3,158 AMFI-disclosed distributors, representing about 1.5% of India's roughly 2.06 lakh mutual fund distributors. The remaining ₹6,229 crore was shared among an estimated 2.03 lakh distributors below AMFI's disclosure threshold.

Unlike an advisory fee, mutual fund distribution commission is not billed separately to investors. Instead, it is paid out of a scheme's expense ratio, which is deducted from the fund's daily net asset value (NAV) before returns reach investors. As a result, investors in regular mutual fund plans indirectly bear the cost of distribution through the scheme's expenses.

Banks lead by a wide margin

Among all distributor categories, banks and bank-associated brokers recorded the highest average commission income. Although there were only 50 entities in this category, they collectively earned ₹6,330 crore, translating into an 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.

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The report attributes this advantage to banks' extensive branch networks, established customer relationships and their ability to gather assets at scale, lowering the cost of acquiring each additional rupee invested.

Overall commissions

While banks topped the list in terms of average earnings per entity, wealth managers and corporate mutual fund distributors received the largest share of the industry's commission pool. The category earned ₹11,629 crore, accounting for over 42% of total commissions. Spread across 1,591 entities, the average annual commission worked out to ₹7.31 crore per distributor, with an average AUM of ₹830 crore.

Where the commissions went (FY2024-25)

*Note: The non-disclosed commission is a residual figure, calculated as the total industry commission of ₹27,335 crore minus the ₹21,106 crore received by AMFI-disclosed distributors. It is allocated across distributors below AMFI's disclosure threshold.

Fintechs vs Individual Distributors

The study also points to the growing role of digital distribution platforms. Forty-three fintech platforms collectively earned ₹458 crore, averaging ₹10.65 crore in annual commission per entity and managing an average AUM of ₹1,351 crore.

By comparison, 1,474 AMFI-disclosed individual mutual fund distributors earned ₹2,689 crore, translating into an average annual commission of ₹1.82 crore and an average AUM of ₹190 crore per distributor. The disparity is even more pronounced for smaller distributors. An estimated 2.03 lakh distributors below AMFI's disclosure threshold shared ₹6,229 crore, averaging just ₹3.07 lakh in annual commission each.

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The Commission Gap

According to the report, the concentration of commissions is largely a function of scale rather than regulation. Since trail commission is linked to assets under management, larger institutions benefit from wider distribution networks and greater customer reach. Independent distributors, on the other hand, typically build their client base through one-to-one relationships, resulting in higher acquisition costs and relatively smaller asset books. The report also notes that trail commission applies only to mutual fund assets mapped to a distributor's AMFI Registration Number and does not cover services such as insurance reviews, loan planning or nomination assistance.

For investors, the analysis recommends understanding how their adviser is compensated, checking whether a direct plan of the same scheme is available, and verifying whether the adviser is an AMFI-registered mutual fund distributor or a SEBI-registered investment adviser. According to the report, while both models are regulated and transparent, knowing how advice is paid for can help investors make better-informed decisions.

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