He who sells more gets more commission. This is always true for any sales program, unless the product is a monopoly product and the manufacturer could not care.

So when a small distributor of mutual fund (or life insurance) compares himself to a big distributor, it is unfair. If a small distributor (let us say he mobilizes Rs.0.2 million a year) for one fund house) thinks he should be treated the same way as a bank which mobilizes Rs. 1000 million a year he is being foolish.

If the regulator thinks that by one piece of legislation he can change the market from a ‘commission’ market to a ‘fee’ market, well the regulator is being naive.

Things do not change because there is somebody sitting in Delhi (with no knowledge of the markets) wants there to be some change.

Change happens when the industry and the players want to change. A mutual fund is allowed to charge ‘bank charges’, ‘custodial charges’, ‘advertising charges’ ….etc. to the scheme (yes not to its own p&L). All it has to tell a banker is ‘If you collect Rs. 1000 million for us in one year, we will pay you slightly higher bank charges’ – is it a commission? I do not know. Even better, if the banker is told – Please collect our cheques ‘At par’ from all our customers in all your branches and remit it to us in a week’s time….till then you can enjoy the float.

How many regulators or auditors are sniffing out such ‘soft rupee’ commissions (of income foregone) from the mutual fund to the bank – who provides banking services, custodial services, distribution services, ….etc.?

Sadly, but Frankly, none.