Regular Plan
A Regular Plan is a variant of a mutual fund scheme sold through distributors, brokers, and banks, where the AMC pays a trail commission to the intermediary from the scheme's assets, resulting in a higher expense ratio and lower NAV compared to the Direct Plan of the same scheme.
Regular Plans are the traditional mode of mutual fund distribution in India, where investors access schemes through banks, national distributors (like NJ Wealth, Prudent), independent financial advisors (IFAs), or online broker platforms. The AMC embeds a distributor commission — typically called trail commission — into the scheme's expense ratio. This commission, usually ranging from 0.5% to 1.0% for equity funds, is paid to the distributor on an ongoing basis as long as the investor remains in the scheme.
For investors, the trail commission is not a separate charge but is embedded in the higher TER, which is reflected in the lower NAV of the Regular Plan compared to the Direct Plan. As a result, Regular Plan investors effectively pay for the distributor's service through reduced returns each year. Over a long horizon, this compounding cost disadvantage can amount to 10-20% of the final corpus.
The case for staying in a Regular Plan is strongest when the distributor or advisor provides genuine value: helping with goal-based financial planning, portfolio rebalancing, behavioural coaching during market downturns, tax planning, and estate planning. Research has shown that investor behaviour — staying invested during volatility, avoiding scheme-chasing, maintaining asset allocation — contributes more to wealth creation than the expense ratio gap. A good advisor who prevents panic redemptions during a crash may more than justify their cost.
AMFI data showed that despite the growth of direct plan awareness and fintech platforms, Regular Plans continued to account for over 50% of equity mutual fund AUM in India as of 2024. This suggests that a significant portion of Indian investors continues to value distributor relationships and advisory support.
For investors who do not require ongoing advice and are comfortable managing their own portfolios, shifting to Direct Plans is straightforward. However, the switch triggers a capital gains tax event, so the net tax cost must be factored in before making the switch. Investors close to their goal horizon should be especially careful about triggering large capital gains just to save a small expense ratio differential over a short residual period.