There seems to be wide variations in the commissions paid to distributors of financial products. While insurance products continue to command highest commissions with a wide margin over other products, mutual funds and the new pension system (NPS) are the cheapest financial products, according to a Crisil study on distributor commissions.
Investors should decide their investments on the basis of their risk appetite and goal rather than depending on the distributor’s recommendations, the study said.
The study reveals that commissions for key financial products vary from few basis points (1 basis point is 0.01 per cent) to about 2 per cent except for insurance products, which command high commissions, going up to 30 per cent of the first-year premiums.
According to the study, if an investor invests for more than 10 years in a Ulip (unit-linked insurance product), it becomes competitive to mutual funds. Hence, investors in Ulips would benefit more if they maintain their policies for a longer timeframe rather than discontinuing it early.