MFD Full Form: Understanding Mutual Fund Distribution Business

Manish Kothari
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Manish Kothari

The mutual fund industry in India has witnessed unprecedented growth in the past few years. This is evident from the fact that the asset under management (AUM) of the MF industry has grown five-fold in the last ten years. Moreover, SIP investments also reached a staggering INR 13,573.08 crore in December 2022, up from INR 13,306.49 crore in November 2022, and INR 11,305.34 crore in December 2021. Amidst these numbers lays a remarkable career opportunity for you. We are, of course, talking about MFD distribution. Read on to learn about MFD full form, and how you can seize this opportunity.  

MFD Full Form

MFD stands for mutual fund distribution. In simple words, it entails helping investors buy and sell units of mutual fund schemes. Moreover, they also educate clients on their risk tolerance, short-term and long-term financial goals, different mutual fund investment options available to them, and much more. In return for services, mutual fund distributors earn a commission on mutual fund investments made by their clients. After understanding MFD full form in mutual funds, let us now move on to get familiar with the various steps involved in starting an MFD Distributor business.

How to Become a Mutual Fund Distributor

Becoming a mutual fund distributor and starting your own MFD business entails several steps. All of these are explained in detail below:

Clear the NISM Series V-A: Mutual Fund Distributors Certification Examination

The first step is to pass the NISM’s mutual fund distributor exam and obtain certification. The National Institute of Securities Markets (NISM) is the national apex body for the licensing and regulation of the financial market dealing profession. It organizes numerous training programs and offers certifications for people seeking to forge a career in the securities market.

Get your AMFI Registration Number

AMFI Registration Number, simply referred to as an ARN number or ARN code, is a unique code issued by AMFI or the Association of Mutual Funds in India, to mutual fund distributors/agents. An ARN number is essential for legally functioning as a mutual fund distributor in India. You can apply for an ARN code online as well as offline.  

Partner with an Asset Management Company or Distributor

After you have your ARN number, the only thing left to do is register with AMCs or large distributors. Thereafter, you can start advising clients on mutual fund investments and start earning commissions. 

Commission Structure of Mutual Fund Advisors

MF distributors can earn an impressive commission from AMCs. While they get an upfront commission at the time of investment, MF distributors also earn a trailing commission for the entire time their client stays invested. To help you understand better, the below table showcases the total commission earned by a MF distributor. Assume that his/her client invests INR 1,00,000 per year for 5 years. Here’s what the commission earned by the mutual fund distributor would appear like.

No. of YearsInvestmentTotal Assets Under Management @ 12%Trail 1st YearTrain 2nd YearTotal Commission
1INR 1,00,000NILINR 500NILINR 500
2INR 1,00,000INR 1,12,000INR 500INR 560INR 1,060
3INR 1,00,000INR 2,37,440INR 500INR 1,187INR 1,687
4INR 1,00,000INR 3,77,932INR 500INR 1,889INR 2,389
5INR 1,00,000INR 5,35,284INR 500INR 2,676INR 3,176

If the client continues to invest for a period of 15 years, the total mutual fund agent commission earned by the distributor in the 15th year will amount to more than INR 18,639. Thus, you can see the amazing business opportunities that lay ahead of you.

Frequently Asked Questions about MFD or Mutual Fund Distribution

Q. What is the full form of MFD in mutual funds ?

A. MFD stands for mutual fund distribution. Anyone above the age of 18 years can become a mutual fund distributor in India and start their own MF distribution business.

Q. What is the role of an MFD distributor?

A. An MFD distributor performs several tasks. These include educating clients regarding mutual fund investment opportunities, helping clients minimize risks and maximize returns, staying up to date with different mutual fund schemes and their past returns, and more.

Q. Is it mandatory to pass the NISM Series VA Exam to start an MFD business?

A. NISM Series VA certification is essential before applying for an ARN number with the AMFI. Thus, one cannot become a mutual fund distributor without clearing the NISM Series VA certification examination.

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