Is Direct Plans are realy Commission Free?

Today I was just going through my twitter account and read one post said 25 Lakh ki Upar Ki Kamaai by investing in Direct Plan with no commission and one question arise in my mind if there is no Commission in direct plan then why ETMONEY and PAYTM are interested in providing services to investors by spending Crs of Rs. in developing apps and advertising. If ther is no commission income why they are spending are they mad? No they are not mad but they are calculated.

First of all I would like to clear the claim in the post of 25 Laks in 25 year with the differance of up to 1.5% yearly. This is a marketing gigs now a days there is not a single MF Scheme is having 1.5% differance in their annualised returns of their both plans and now onwards there is a reduction in Distributors commission and increase in direct expanses this is next to impossible to achieve this differasnce. Just few month ago SEBI reduced 0.20% TER(Total Expanse Ratio) of Regular Plan and allowed to increase 0.20% of TER for direct plan.

Now we will discusse how it is possible to sustain for this type of Apps without commission. There are so many options for them to earn money out of this so called no commission direct plans.

1. They will be earning on your money laying in wallet by investing it in liquid funds. – Not justified because This is possible for paytm but not for etmoney how they will earn because they do not have any wallet facility.

2. They will be paid advertisement charges by AMCs as a remuneration for the business generated. – Ultimately that will be charged to NAVs of the scheme whic is as good as commission paid this will reduce your Upar Ki Kamaai.

3. They will start charging to investors afterwords after achieving some targeted cliental. – Ultimately this will reduce your Upar Ki Kamaai. In this case you will be paying commission instead of AMCs.

4. Sebi has allowed to increase TER of 0.20% for direct plans might be used to incetivise such service providers. – Ultimately this is going to reduce your Upar Ki Kamaai. This is also one kind of commission.

5. Commission will be paid and debited to regular plan – This is not easy but also not impossible. This is a big discussion point towards the transperancy of the NAVs of both Regular as well as Direct Plans. At a glans there is no differance in both the plans except TER differance then how one schemes return is almost 1.25 times the differance virtually it should be as much as the differance of TER. During AMFI Summit when I asked this question to the CEO Pannel they have not attended and still there is no clearification on this issue. I have asked what is transparency of NAVs of both Plans.

6. This is for the post writer If any other way for your earning by selling direct plans which justify your post please reply. After all you are not running NGOs.

There is no Free Lunch in this Word. Even If an AMCs are starting saperate channel for distribution of direct plans there will also be remunaration to the staff involved in marketing of the plan. They will also be paid salary+incentives all this will be chatrged to NAVs with new head of accounting. Like “New Bottle with Old Wine” commission will be called as an Salary and Incentives. Distributors are also paying Salary to their staff so they also need money.

Now you can think is your direct palns are really commission free of just a marketing gigs.

Distributor can also generate more than this differance in Regular plans if he/she plan properly. We need to think out of the box and get out of handcuff of automated transactions. Do proper planning and asset allocation and time management you will earn more than what you earn in direct plan. I am writting on this matter on my blog frequently. TO EARN SOME EXTRA MONEY YOU NEED TO DO SOME EXTRA WORK DONT RUN AFTER EASY MONEY.

Without having knowledge of MF buying direct plans just to save commission paid to distributors might be dangerous for your financial health. Are you playing with health by just for saving doctor’s fees by purchasing medicines from pharma stores because they know the medicines then why are you taking risk with your financial health. Remember your Distributors is Earning Commission by providing advisory and services not Eating Commidssion as the post trying to say. Everybody is here to earn money ETMONEY and PAYTM are also spending money to earn money.

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