From distributor to PRIM manager: how the numbers work

For a mutual fund distributor, PRIM is a change of business model: from commission paid by the fund house on regular plans, to a fee paid by the client on direct plans.

Three numbers decide it

1. The book that moves. Only clients with ₹25 lakh or more can come into PRIM, and not all of them will want to.
2. The fee gap. On the clients who move, you stop earning trail (they switch to direct plans) and start earning the PRIM fee, capped at 1% a year. Your extra income is the gap between the two.
3. Running costs. A Principal Officer, a Compliance Officer, at least one more employee, audit, systems and SEBI fees.

A worked example

Assume ₹100 crore of client assets moves into PRIM, your average trail on it today is 0.8%, and your PRIM fee is 1%.

Item	Per year
Trail you stop earning	₹80 lakh
PRIM fee you start earning	₹1 crore
Extra income from the move	₹20 lakh

If running a PRIM business costs ₹30 lakh a year, this book alone does not cover it. You would need either a larger book, a fee nearer the cap with performance fees, or new clients who were not paying you trail before.

That last point is often the real case for PRIM: a regulated, fee-based product to win investors who would not buy through a distributor.

What the example leaves out

• One-time costs: SEBI fees of ₹11 lakh, legal and setup
• ₹2 crore of net worth that must be maintained, partly in liquid assets
• Tax: moving a client from regular to direct plans means redeeming units, which can trigger capital gains for the client
• Clients you continue to serve through distribution, outside PRIM

Try your own numbers in the economics calculator.