When you invest in a Regular Plan, the Mutual Fund Company pays your broker back a hidden % commission every quarter.
The quarterly commissions paid to your broker or agent are not based just on your initial amount invested but on what your investment grows to.
The math is simple:
If your initial investment is Rs.10,00,000, your broker is paid a around 1% or Rs.10,000 as initial commission each year by the Mutual Fund Company.
When your investment grows to Rs.4,00,000, then the broker is paid Rs.14,000 each year.
When your investment doubles to Rs.20,00,000, your broker is paid Rs.20,000 each year.
These never ending commissions remain hidden from you. Even if you stop using a broker’s services he will continue to receive the hidden commissions on those investments, because his broker code is attached to your initial investment.