A trailing commission is the commission a financial advisor gets from the fund house every time the former’s clients invest money on one of the latter’s schemes.
Everytime we pay installments in a Sip financial product, the financial advisor or agent who sold it to us, if at all, gets a trailing commission from the fund house of anywhere between 0.5 and 2 percent of the investment sum (Sip amount).
Of course, the amount gets deducted from our principal kitty as part of TER or as transaction cost.
Sebi, in 2018, banned upfront commission which advisors used to earn the first time a client made an investment payment to a fund house through them. Trailing commission is what is left as the primary means of income for the advisory industry.