Getting a commission never means that a Mutual Fund distributor is allowed to trade the MF scheme to the investors just to get a commission. Well, the regulations are very severe in this respect.
Now let's discuss 8 points which help in differentiating between a Mutual fund distributor from Investment Advisor.
Paying mode for advice
We all know that mutual fund distributor is enrolled with AMFI, they are usually the executors of your investments. The investor asks the mutual fund distributor to buy/sell MF plans for them. From doing so the AMC gives commission to the MFD. To avoid mis-selling of MF plans the SEBI has directed AMCs. To pay only trail commission by utilising the trail-only model. Also, not to give any upfront commissions or upfronting of any trail commissions straight or secondhand. Even the contests or sponsorships would be recognised as an upfront payment. These investment advisors normally charge a fee rather than get commissions from AMC. So with this change in the industry investors.
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