How to Become Mutual Fund Advisor
Mutual Fund Advisors are qualified professionals who advise investors in making mutual fund investments. The advisors provide tailor-made financial advice to their clients or investors after analyzing their risk appetite, financial goals & investment horizons, etc. They would make money in the form of earning commissions from the fund house or distributors on the selling of mutual fund schemes.
The mutual fund advisors offer their expertise in selecting & making a portfolio of mutual fund schemes aligning with the financial goals of their investors. This requires mutual fund agents to track the performances of various mutual fund schemes with different investment objectives along with keeping updated with the important events in the financial markets that may affect the performances of the schemes.
They would go on following a rigorous qualitative & quantitative framework for selecting the best funds for investments by their clients. The advisors would also guide the investors after their initial investments on making updates in their portfolio i.e adding or redeeming schemes, increasing SIPs, pausing SIPs, etc. when they identify any challenges or potential opportunities in the market related to investments which may be beneficial for growing the wealth of its client.
As per AMFI(Association of Mutual Funds in India) Guidelines, For becoming a Mutual fund distributor/agent one needs to clear the mandatory “NISM Series VA Mutual Fund Distributors Certification” Examination and get an ARN number thereafter.
What is the Role of mutual fund advisors?
Mutual Fund advisors have to play various important roles while in interactions or maintaining relationships with their clients, with the objective of helping them grow their money or reach their financial goals through investments in mutual fund schemes. Some of the important roles played by a mutual fund agent include:
1. Understanding Financial needs of the Investors
The mutual fund advisor needs to understand the financial needs and purposes of the client investors. They have to interact with investors to determine their goals and the time required to meet them. They only advise the clients on the basis of the client’s purposes for their investments i.e which maybe for retirement, wealth creation, planning higher education of the child, Buying a car, or planning a vacation. Financial needs differ for everyone and the investment strategy needs to be aligned with that for meeting the needs on time.
2. Educating the investors
The mutual fund agent has to educate its investor regarding the financial products available in the market and that may be suitable to their needs. Sometimes the advisor might have to go deep and educate the investors about all the investment constraints they might face, including the difference between the investor's ability to bear the risk and willingness to take the risk.
Every investment product carries different risk-return characteristics, and so it is important to make the clients understand them before advising investments.
3. Evaluating the risk-appetite of Investors
One of the most important roles to be played by a mutual fund advisor is to evaluate the risk tolerance of the clients or investors. Risk-tolerance of the investor may be determined by the advisor on the basis of factors like marital status, children, income, monthly expenses, dependents, age, loans or EMIs, future planned expenditures, investment horizon, financial goals & others. Different investments are suitable for different investors with regard to the risk-appetite they carry. For example- Investors with high-risk appetite may be advised to invest in Small-Cap Equity funds considering the minimum required horizon whereas it would not be right to advise these funds to an investor with low-risk tolerance.
4. Analyzing various Investment options
There are various investment options in mutual funds available in the market but the advisor just needs to identify the best ones that might provide the best outcome for investment by an investor as per his risk-profile & financial goals. There are many sub-categories of mutual fund schemes within the asset classes i.e in equity & debt. The mutual fund advisor has to make an analysis of the schemes suitable for his clients by checking the performance metrics & comparing the scheme with its peers and coming out with the best ones.
This requires the mutual fund agent to be fully informed about the events happening in the financial markets and also the economy as a whole
4. Diversification of Portfolio
Diversifying is very important since it helps in reducing the overall portfolio risk by spreading it over a broad investment range. The advisor guides the clients on spreading their money across mutual fund schemes which will help to reduce the volatility of the portfolio.
The advisor does a lot of research to come out with the best investment options across asset classes and within the categories that will be put together to make a portfolio. Therefore, mutual fund advisors play an important role in optimizing portfolio and minimizing risks.
Also Read: Mutual Fund Distributor Commission Structure
5. Maintaining Financial Records
One important job of the mutual fund advisors is to maintain the financial records of the client. The records may consist of transaction details for MF Investments, holding details, income details including PAN Card details & others which are not supposed to be misused or shared without the client's consent. Advisors will have to maintain the records of services provided to the clients including invoices, details of services offered and any other documents which will be required during the audit of the firm by regulatory bodies.
How to become a mutual fund advisor
To become a mutual fund agent, one needs to appear for a mandatory examination “NISM Series-V-A Mutual Fund Distributors Certification” conducted by NISM. After passing the examination, the candidate has to obtain an ARN (AMFI Registration Number) by approaching AMFI through CAMS-KRA.
Stepwise - How to Become a Mutual Fund Agent?
To become a Mutual Fund Agent one can follow these steps:
Step 1- Registering for the NISM Exam
The aspiring candidate has to register for the NISM Series VA Mutual Fund Distributors Certification Examination by logging into the official website of NISM (National Institute of Securities Market). The registration fee for the exam is Rs.1500 excluding GST and the test is conducted at the NISM centers. After making the payment, when the registration is successful the candidate can download the PDF File for the preparation of the examination, and additionally one can purchase the hard copy of the study books from the nearest Book stores or e-commerce websites.
The exam consists of 100 MCQ questions carrying 1 mark each, and there will not be any negative marking for wrong answers. The candidate needs to obtain at least 50% or 50 marks to pass the examination.
The candidates can study the content from the study material provided by the NISM, and for practice they can prepare through the various mock or practice tests available on NISM & third party websites.
Senior Citizens above the age of 50 (Grandfather by age) and the professional engaged in the distribution or sale of mutual funds with over 10 years of experience are eligible for getting a NISM Mutual Fund Distribution Certification by choosing any the following options:
- Appear & Pass the NISM Series VA Mutual Fund Distributors Certification Examination
- Completing the NISM’s CPE(Continuing Professional Education) Training Program
CPE is a training program consisting of a 6-hour classroom training module (in a single day) followed by a test at the end. The registration fees for the program is Rs. 2,500 and an application for the program can be made online on the NISM’s website.
Step 2- Passing the NISM mutual fund distributor examination
Appearing & Passing the examination would be the next step for the candidates. The result for the examination will be displayed on the test screen just after finishing the exam. The candidates can download the e-format of the certification from the NISM Website and the hard copy of the certificate will be delivered to their mentioned address within 30 working days.
The validity of the certificate will be 3 years from the date of passing the Series-V examination. The validity of the CPE Program is also the same i.e 3 years.
Renewing the NISM Mutual Fund Distribution Certification
Any professional engaged in the mutual fund’s sales or distribution holding any one of the below-mentioned certifications in mutual funds are eligible to renew their certificate:
(a) NISM Series-V-A: Mutual Fund Distributors Certification Examination
(b) NISM Series-V-A: Mutual Fund Distributors Continuing Professional Education
(c) AMFI Mutual Fund (Advisors) Module
(d) IICM: Refresher Course on Mutual Funds
(e) CIEL: Refresher Course on Mutual Funds
They can revalidate or renew their certificate expiring in 12 months by appearing & successfully completing either for the NISM Series V examination or NISM CPE Mutual Fund Distribution Program.
Step 3 - Obtaining the ARN from AMFI
After passing the NISM distributor examination, the candidate needs to undergo a mandatory KYD(Know Your Distributor) process & apply to AMFI for obtaining AMFI Registration Number to start selling or advising on mutual funds. The candidate would need to provide the details regarding PAN, Identity details, NISM Distribution certificate number, and other details into the application form for ARN.
The duly-filled forms need to be submitted through CAMS-KRA(KYC Registration Agency) by physical(in CAMS office) or online mode as per the requirements. After successful verification of forms & documents, the ARN number will be assigned to the Mutual Fund Agent, and the card will be delivered to the mentioned address within a few days.
The fee for obtaining AMFI Registration Number will be Rs.3000 excluding GST.
Step 4 - Registering with Distributors or AMCs
After the advisor has obtained his ARN number, he can start selling mutual funds to his clients and earn commissions. Now, the mutual fund agent needs to enter into agreements with the AMFI distributors for selling the funds and thereby earning commissions on them. The distributors would pay the agreed commission on the mutual fund schemes sold by the agent.
Also, the mutual fund advisor can directly enter into agreements with the AMCs or fund houses for selling their mutual funds as a distributor.
It is better to connect with the distributors so as to avoid the hassle of the registration & documentation requirements while getting into agreements with several fund houses.
AMC Empanelment links
Following are the direct weblinks for empanelment with some of the Top AMCs:
- SBI MF
- Axis MF
- Edelweiss Mutual Funds
- ICICI Prudential Mutual Funds
- HDFC Mutual Funds
Mutual Fund Agent Eligibility
There are no such minimum requirements regarding the subject studied in high school or degrees by an individual. However, the minimum qualification to take this examination is class 12th or class 10th with 3 years of diploma.
Education certifications or degrees in the streams of economics, financial markets, investment analysis would help the advisor to make a good start in the mutual fund industry.
The candidate should be of 18 years or above to become a mutual fund agent. There is no limit on the maximum age.
To become a successful Mutual Fund Agent, one should have the following skills:
- Understanding of Financial Markets
- Knowledge about the types of mutual fund schemes available in the market.
- Analysis Skills (for analyzing different investment options)
- Evaluating the risk profile of investors
- Communications Skills (for interactions with clients and making them understand about their investments )
- Research Skills ( for conducting research on the various mutual funds with regards to their past performance, durations, holdings, concentration, asset qualities, risk associated with a particular scheme and many others)
- Passing Up to date recommendations to clients as per market conditions.
All the skills mentioned above are not a prerequisite for becoming a mutual fund agent rather having these skills helps to become a successful mutual fund distributor. Skills are attained through the experiences of working in the industry.
One may also try to be updated with the market facts & events to make better recommendations of investments to his clients.
Mutual Fund Advisor Commissions
Mutual Fund Agent Commission varies across mutual fund schemes & different Fund Houses or Asset Management Companies. Every AMC has its own structure for paying commissions to the distributors and also, they have defined different percentages of commissions in the range of 0.1% to 2% for categories- debt, equity & hybrid categories etc..
The AMCs pay the commissions on the total AUM(Asset Under Management) which is calculated yearly(including SIPs for the year & lump-sum investments) and is paid on a monthly basis to the distributors. The commission paid by the AMC on the scheme is a part of the expense ratio of the mutual fund scheme.
The commission also differs across the cities. The mutual fund commission structure include trail commission paid for:
- T-30 Cities - Here, the AMCs would pay the same specified commission on the mutual fund schemes. No extra incentive is paid for the investments or SIPs of mutual fund schemes sold for the first year. (earlier an upfront commission was paid to distributors for selling the schemes for the first time for SIPs & Lump Sum)
The commission is subject to revisions by the AMCs or Fund Houses every quarter.
2. B-30 Cities- For selling the schemes to the investors in the B-30 (below top 30), the fund houses provide special incentive i.e Master B-30 Incentive where the AMCs would be paying extra incentive commission as per the pre-defined rates for the first year (fresh investments made by the investors) along with paying the normal commission specified for selling the schemes (the same paid for T-30 selling).
Along with the trail commissions paid for the year, some of the fund houses also offer special incentives i.e SIP additional commission (upfront) which is paid to the distributors or mutual fund agents for selling the fresh SIP investments of the mutual fund schemes. The SIP additional commission is only paid on the amount of the first SIP made by investors.
Mutual Fund Advisor Career
Indian Mutual Fund Industry has been growing at a high pace from the last decade. As per AMFI data, the total AUM ( Assets Under Management) as of April 2020 stands at approx. Rs.24 lac crores witnessing a two-fold increase in a span of 5 years from Rs. 11.86 lac crores in April 2015.
The Indian Mutual Fund Industry has been eyeing an AUM of Rs. 100 lac crores along with 10 crore investors by 2030. The high growth shown in the data of mutual funds points out the scope of opportunities in the mutual fund industry. Moreover, with the financial agents/advisor or distributors being low in numbers to meet the needs of investors in our country, there is a requirement of more new entries into the space to cater to the growing client base.
A career as a Mutual Fund Advisor can be highly rewarding in terms of compensation payments. The commission earned grows simultaneously with the growing clients & their increasing investments which provide the advisors with endless opportunities to grow their incomes. Along with that, the mutual fund industry also offers a diverse range of career opportunities for individuals in services of sales, marketing, risk management, investment management, compliance, fund management, journalism & others.
Mutual Fund Training Institutes in India
Following are the popular institutes providing educational training on Mutual funds & financial markets in India.
- Institute of Career In Financial Market, New Delhi
- Sydenham College of Commerce and Economics, Mumbai
- Equity Analysis Inc., Mumbai
- Forex Keys (VJS Academy)
- Equity Analysis Inc., Mumbai
- Visakhapatnam Kunj Bihari S Goyal Online Academy for Learning and Development (GOLD), Mumbai
- Dalal Street Investor Academy, Pune
- Focus Educare Pvt Ltd, Bangalore
- CSE Institute of Capital Market, Kochi
- The Greed N Fear -Institute of technical analysis, Ahmedabad
- Datta Institute for Stock Market Education, Hyderabad
Q. What are mutual funds?
A. Mutual fund is an investment tool which pools money from many investors to purchase securities. Investments are made as per the objective of the fund and each fund carries different risk-return characteristics. Investors gain when the securities within the portfolio provide positive returns.
Investing through mutual funds is one of the most convenient and popular ways to grow one’s capital.
Q. Who is a mutual fund agent?
A. A Mutual Fund Agent is a qualified professional who advises & assists investors on investing in mutual fund schemes.
The Agent would make money in the form of earning commissions from the fund house or distributors on the selling of mutual fund schemes.
Q. How to become a mutual fund advisor?
A. To become a mutual fund agent, an individual needs to appear for a mandatory examination “NISM Series-V-A Mutual Fund Distributors Certification” conducted by NISM. After passing the exam, the candidate has to obtain an ARN (AMFI Registration Number) by approaching AMFI through CAMS-KRA.
The Agent can start providing advice & selling schemes as soon as he gets his ARN (AMFI Registration Number) issued by AMFI.
Q. What is the process for mutual fund agent registration?
A. Registration of mutual fund agent involves the following steps:
1.Registering for the NISM Mutual Fund Agent Exam(involves filling the Identity,PAN information and paying the required fee)
2.Passing the Exam (Passing the exam with minimum 50% marks)
3.Obtaining the ARN from AMFI ( involves complying the KYD process & filling an application form for getting ARN from AMFI through CAMS-KRA)
4.Registration & Agreements with AMFI Distributors or AMCs (for the purpose of selling schemes)
Q. How to become a mutual fund distributor in India?
A. The process for becoming a mutual fund distributor is the same as for becoming a mutual fund agent/ advisor. The distributors also have to enter into agreements & complete registration or documentation processes for connecting with the AMCs to officially sell their schemes and earn commissions on them.
The Mutual Fund Agents or Advisors can choose to sell schemes either through connecting with AMFI distributors or AMCs.
Q. What is the process for Senior citizens to become a mutual fund distributor/ Agent?
A. Individuals above the age of 50 can apply through “Grandfather by Age” Category where they have the option to successfully complete any one of the following programs to get the NISM Mutual Fund Distribution Certificate.
1.Appear & Pass the NISM Series VA Mutual Fund Distributors Certification Examination
2.Completing the NISM’s Continuing Professional Education (CPE) Training Program
Q. What is the commission structure for mutual fund agents?
A. The Commission paid to advisors varies across mutual fund schemes & in different Asset Management Companies. Every AMC has its own structure for paying commissions to the distributors and are generally in the range of 0.1% to 2% for categories- debt, equity & hybrid categories etc..
The commission structure also differs across the cities. A special incentive(additional to what is fixed) is paid to distributors for selling the schemes to investors in B-30 cities for the first year.
Q. Who is eligible to give a mutual fund agent exam?
A. The minimum requirements to be eligible for giving the exam include:
The individual should be of the age 18 years & above.
The minimum qualification to take this exam is class 12th or class 10th with 3 years of diploma.
The exam does not have any requirement with regards to the streams/specializations chosen in school or college and doesn’t ask for any additional certifications.
Q. What is the role of IFA in mutual funds?
A. Independent Financial Advisors (IFA) are the small-medium size financial advisors who provide financial advice to investors on various investment products including mutual funds and others.
Q. What are the career prospects of being a mutual fund advisor?
A. With the growing AUMs in the Indian mutual fund industry along with the rising investor base, the career as an advisor has a great scope. The profession has endless opportunities for the advisors to grow their compensation or income by earning commissions on the sale.
Q. How to choose the right mutual fund?
A. Choosing the right mutual fund for investment involves analyzing the scheme through parameters like duration, asset quality, type of holdings, past performance, performance of the scheme against benchmark, risks associated with the particular scheme, fund manager’s experience and many others.
Also, it involves selection of the scheme as per the investor’s risk appetite and financial goals.
The investors should prefer taking expert advice from mutual fund advisors or agents on their investments because being a qualified personnel in the industry, they have a better understanding & know-how of the MF Investments.
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