Life Insurance Vs Mutual Fund Agents : Who Earns More?

Including us, everybody’s eyes are always on the insurance agent earning. Do we know our mutual fund agent earning, an agent who sells you mutual funds? Charges fee (fee-based financial planners) or some online portals (where you feel so much comfort to invest online)? Let us discuss who earns more: Life Insurance Vs Mutual Fund Agents.

Let us guess that tenure of investment is 15 years and investor is ready to invest yearly for Rs.1,00,000.  Also, Insurance Agent, as usual, offering a traditional plan saying secured and guaranteed no risk. Whereas the Mutual Fund Agent creates a portfolio for you and recommends you some mutual fund products to invest. Now let us discuss what are the earnings from both the format of agents.

Must Read: The best mutual fund to invest in 2019

Insurance Agents Earnings

Usually, for traditional plans, the insurance commission is as high as around 35%. And so this is known as first-year commission and the rest of the year’s commission is called a renewal commission. In the 2nd and 3rd years it will be around 7.5%. And so from the 4th year onward, it will be set at 5%. Moreover, it is the reason why insurance agent attracts you by sharing commission in the first year of your buy. They are even looking for a long term 5% return what they get from you.

Mutual Fund Agents Earnings

Mutual fund agents usually get 4 types of commissions which are as follows:-

1) Only One-time transaction charge

• This is set as Rs.150 for best investors of mutual funds and only Rs.100 for existing investors. Moreover, this is the cost that is going to deduct from your investment.
• We need to reject this cost as it is not high, one time and the agent is going to bear this much to close the sale.
• This is going to deduct from your investment amount either one time if you have invested a lump sum or Rs.25 per month if you invest it through SIP.

2) Upfront Commission

• This is the commission that is going to pay by mutual fund India companies to agents and it includes in the total expense of mutual funds.
• Moreover,  you will not feel the heat of these expenses but indirectly you will be paying for it. Your mutual fund distributor will receive it whenever you invest newly.
• In addition, this commission differs from product to product, high in ELSS funds (around 4.5% to 1%), equity schemes (around 0.5% to 2.5%) and too low in debt funds (around 0.2% to 0.8%).

3) Trial Commission

• It is one of the undisclosed type commission structure which you are not going to know. This commission structure range from 0.5% to 1% depends on the products and best mutual fund companies.
• Moreover, this is going to pay to your agents even if you do not invest also but if your investment stays without withdrawal.
• Also, this is going to pay on your total net worth or asset as per management. Suppose the agent has around 100 clients and which includes all of them he has assets under management is around Rs.5 Crores then 0.5% of Rs.5 Cr is Rs.2,50,000 annually.
• If next year as per the good market conditions. Additional investment by existing clients has grown to Rs.10 Cr then his next year commission will be Rs.5,00,000.
• And so at the same time, some clients withdraw their money or total asset as per him depreciation due to bad market conditions to Rs.2.5 Cr then he will receive Rs.1,25,000 in that year.
• This trial commission structure basically creates with good intentions to protect investors in giving them good fund selection.
• If agents advice is good and investors money grows then both of the agents and investors will get the profit otherwise both will lose it.

4) Fee-based on AUM of Client

• This type of structure of collecting the fee is emerging once the ban on entry load.
• It depends on agents to agents. In addition, it usually ranges from 1% to 2% depending on the service and value agents provide you.
• I notice a lot of agents charge this fee saying they will not get anything from investor investment as nothing will be disclosed to the client either upfront or trial (both are adjusted in NAV itself).
• Moreover, investors are thus fooled that the expenses to them are the fee they are paying to their MF agents.
• But remember that mutual fund companies will not pay this fee to the agent until he needs to collect it from investors. Also, learn about Mutual Funds Benefits

Comparison: Life Insurance Vs Mutual Fund Agents

Now after understanding earning ways for both of them, life insurance and mutual fund distributor. It is now time to check who earns more. For calculation purpose, I consider Life Insurance commission structure as-1st-year commission 35% (including bonus commission). And so 2nd and 3rd yr commission 7.5% and from 4th year onward it is 5%.

For MF advisers earning, I consider upfront as 0.5% and trial also 0.5%. But exclude the fee they charge.  I consider the Best equity mutual fund investment with a growth of 12%.

In both, the cases yearly investment is Rs.1,00,000 and the time period is 15 years. I consider 15 yrs period because normally insurance agents will sell you the product for more than 15 years because their earnings are also based on the term of the policies. Below are the following calculation and results.

Through the above table, you notice that in the beginning period the insurance agent’s earnings are high. And so after the 4th year, it is constant until the end of the period. As well as mutual fund agent’s earnings are low at the beginning but as AUM grows there earning also improve. When you compare the earnings of both in the end, both are almost equal.

Conclusion: Life Insurance Vs Mutual Fund Agents, Who Earns More?

Can we buy a life insurance product? No…because you are buying a product to fulfill our financial dreams but not our agents. Moreover, what I am not pointing here is to buy life insurance products as an investment. I am pointing is how some mutual fund agents hide their earnings. Also, disclose the earnings of life insurance agents.

Nothing is free on this planet Earth…including our advice But there have to be some value addition and customer-centric approach. In addition, I found some investors who are still paying entry load. As their SIPs were started before they load ban and still continues.

To make the best profits on your money and want to know the Best Performing Mutual Funds India. As well As Don’t worry! Get in touch with the team of experts at Wealthbucket where our aim is to simplify compliances. Moreover, Let us guide you to reap the best benefits  Debt Mutual fund, Large Cap Mutual fund or Multi-Cap Mutual fund, to achieve your objectives.

For more details regarding the various compliances that your company may need to meet. Also, visit our website Wealthbucket. In addition, to resolve your problem just give a ring at +91 9999379929. In addition, shoot on our email at contact@wealthbucket.in.

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