Definition of Mutual Funds Distributors
Mutual fund distributors are individuals or entities that enable investors to buy and sell units of mutual fund schemes. For facilitating these transactions, mutual fund distributors earn income in the form of commissions on the mutual fund investments made by their clients. Moreover, mutual fund distributors are not only responsible for facilitating these transactions by carry out a number of other tasks. These include understanding each investor’s risk tolerance as well as financial goals and suggest appropriate investment options and strategy. In India, the profession of a mutual fund distributor is overseen by the Association of Mutual Funds in India or AMFI. Every individual or entity that wishes to become a mutual fund distributor in India must register with the AMFI before commencing operations.
Benefits of Becoming a Mutual Fund Distributor
Becoming a mutual fund distributor has several benefits, including:
Flexibility in work: Mutual fund distribution offers the flexibility to work on one's own schedule and from any location. This is especially beneficial for individuals who want to work from home or have other commitments.
Diversified product portfolio: As a mutual fund distributor, you have access to a wide range of products from different fund houses. This allows you to offer your clients a diversified portfolio and cater to their specific investment needs.
Helping people achieve their financial goals: By becoming a mutual fund distributor, you have the opportunity to help people achieve their financial goals. You can provide them with valuable advice and guidance on how to invest their money and help them make informed decisions.
Continuous learning: Mutual fund distribution requires continuous learning and staying up-to-date with the latest industry trends and regulations. This helps you to consistently improve your skills and knowledge, which can be beneficial in your personal and professional life.
How to Become Mutual Fund Distributor ?
The growing popularity of mutual funds as tools for wealth creation over long term is drawing more and more people to the career as a mutual fund distributor. If you too wish to start your own mutual funds distribution business, then here are the steps to follow:
Pass the NISM Exam
The first step towards becoming a mutual fund distributor is registering for and clearing the NISM Series V-A Mutual Fund Distributors Certification Examination. The National Institute of Securities Markets – a public trust established by the Securities and Exchange Board of India (SEBI) in 2006 conducts the exam. NISM charges a small fee for registering for the examination. A candidate must score at least 50 per cent marks to clear the exam. The test is comprised of 100 questions of one mark each. You can visit our dedicated page to learn more about NISM Series VA Certification.
Apply for an ARN Number
ARN code or number performs several functions for investors as well as mutual fund distributors. For instance, it safeguards investors by ensuring the credibility and traceability of mutual fund distributors in case of scams or frauds. Moreover, it also aids in recording investments made via a particular mutual fund distributor and calculating the total commission earned through those investments. Every individual or entity that wishes to start their own mutual funds distribution business must apply for an ARN number with the AMFI. This application process includes submission of various documents, Know Your Distributor process, and more. You can visit our dedicated page on ARN number to know more about these unique identification codes.
Register with a Distributor / AMC
Once you have completed the AMFI registration process and obtained your ARN number, you can start distributing mutual fund schemes to investors and earning commission. All that is left to do is entering into agreements with AMFI distributors and sell these funds. These AMFI distributors pay a commission as per the agreement, based on the quantity of mutual funds schemes the distributor sells. In addition, the distributor can also partner with AMCs or Asset Management Companies or fund houses and sell mutual fund schemes.
Work Profile of Mutual Fund Distributor / Advisor
As mentioned above, selling mutual funds to investors may appear to be the entire job, but that is only a part of being a mutual fund distributor. Here are the myriad tasks that MF distributors carry out:
- Follow the securities market trends to provide reliable investment advice to investors.
- Stay up-to-date on the upcoming mutual fund schemes by keeping in touch with mutual fund managers. The financial expert should also prepare reports on the past and future (expected) performance of different sectors.
- Prepare comprehensive reports on various mutual funds and their schemes.
- Approach potential clients and discuss investment opportunities with them.
- Educate these potential clients on mutual funds, schemes, returns, risks, charges and other aspects of mutual fund investing.
- Help them figure out the most appropriate mutual fund investment option for them based on their risk profile.
- Assist these clients in investing in mutual fund schemes of their choosing.
- Follow up with these clients about their mutual fund investment journey and clear out any doubts.
- Provide timely advice to help minimize risk and maximize returns from investments.
Career Prospects of MF Distributor
There is no denying that mutual fund investments are witnessing an unprecedented boom in India. This has given rise to a tremendous opportunity for people who wish to forge a career in the securities market. It is of course, mutual fund distribution. With very little expenditure requirement and low educational qualification, mutual fund distribution presents as an amazing career prospect for many. Moreover, the process to become a mutual fund distributor is also quite straightforward. One simply has to clear NISM’s Mutual Fund Distributors Certification Examination and apply for an ARN number with the AMFI. With these simple, time and cost-effective steps, one can kick-start a career as a mutual fund distributor.
Mutual Fund Distributors Certification Examination (NISM-Series-VA)
As mentioned above, registering to appear for NISM Series VA Mutual Fund Distributor Exam is the first step towards becoming a mutual fund distributor. The institute provides study material one can utilize while preparing for the certification test. It is a two-hour-long test which has 100 multiple choice questions for one mark each. NISM charges INR 1500 as registration fee to appear for the exam. Furthermore, these are NISM courses that one can apply for to take the preparation a notch higher. Free NISM mock test are also an effective way of getting ready for the certification exam. These will familiarize you with the exam pattern and eliminate any doubts about the format of the test. You can easily find NISM Series VA mock tests online and offline.
Commission Structure for Mutual fund Distributors in India
Mutual fund distributors earn a handsome commission on the mutual fund investments of their clients. These commission come as upfront as well as trailing mutual fund distributor commission. While upfront commission is earned at the time of making the investment, a MF distributor earns trailing commission for the entire time the client stays invested in the mutual fund schemes. Below is the mutual fund commission structure for total commission earned by a mutual fund distributor if a client invests INR 1,00,000 annually for a period of 15 years.
|No. of Years||Investment||Total Assets Under Management @ 12%||Trail 1st Year||Train 2nd Year||Total Commission|
|1||INR 1,00,000||NIL||INR 500||NIL||INR 500|
|2||INR 1,00,000||INR 1,12,000||INR 500||INR 560||INR 1,060|
|3||INR 1,00,000||INR 2,37,440||INR 500||INR 1,187||INR 1,687|
|4||INR 1,00,000||INR 3,77,932||INR 500||INR 1,889||INR 2,389|
|5||INR 1,00,000||INR 5,35,284||INR 500||INR 2,676||INR 3,176|
|6||INR 1,00,000||INR 7,11,518||INR 500||INR 3,557||INR 4,057|
|7||INR 1,00,000||INR 9,08,901||INR 500||INR 4,544||INR 5,044|
|8||INR 1,00,000||INR 11,29,969||INR 500||INR 5,649||INR 6,149|
|9||INR 1,00,000||INR 13,77,565||INR 500||INR 6,887||INR 7,387|
|10||INR 1,00,000||INR 16,54,873||INR 500||INR 8,274||INR 8,774|
|11||INR 1,00,000||INR 19,65,548||INR 500||INR 9,827||INR 10,327|
|12||INR 1,00,000||INR 23,13,313||INR 500||INR 11,566||INR 12,066|
|13||INR 1,00,000||INR 27,02,910||INR 500||INR 13,514||INR 14,014|
|14||INR 1,00,000||INR 31,39,260||INR 500||INR 15,696||INR 16,196|
|15||INR 1,00,000||INR 36,27,971||INR 500||INR 18,139||INR 18,639|
Responsibilities of MF Distributors
Educating the Investor
Not everyone hoping to invest in mutual funds possesses the required knowledge. It is the responsibility of a mutual fund distributor to educate his or her client on the many investment opportunities, AMCs, mutual fund schemes, risks, and more.
Create a Risk Profile
Risk is inherent in mutual fund investments, and investors have varied levels of risk tolerance. It is the duty of the mutual fund distributor to analyze the risk tolerance of the investor. Several factors such as long-term and short-term financial goals, duration of investment, family status, financial responsibilities and more are taken into account to create this risk profile.
Analyze and Suggest Investment Options
Based on the risk profile, a mutual fund distributor suggests mutual fund schemes to the investor. A distributor may suggest debt funds to minimize risk or equity funds to maximize returns.
Formulate an Investment Strategy
Every investor needs an investment strategy to safeguard the investment and derive the maximum returns. It is the responsibility of a mutual fund distributor to suggest an effective investment strategy that helps achieve the client’s short-term and long-term financial goals without taking too much risk.
Help Investor Diversify
Diversification is one of the most critical requirements of any stock or mutual fund portfolio. However, it is often overlooked, especially by mutual fund investors. Therefore, MF distributors should emphasize the importance of diversification to their clients and suggest measures to incorporate this concept while building a MF portfolio.
Mutual fund distributors manage discreet financial transactions of their clients. These transactions can often be high in number. Mutual fund distributors must maintain clear records of clients’ transactions. These records are also mandatory for auditing purposes.
Start your own Mutual Funds Distribution Business with Zfunds
ZFunds is one of the fastest growing mutual fund distributors in India, and by associating with us, you get a chance to become a partner in this growth. We have a team of investment experts who help our distributors maximize their clients’ returns. They consistently review distributors’ portfolios and suggest changes to eliminate unnecessary risks and grab investment opportunities. Registering with ZFunds is super easy and does not take too long. You can start by installing our ZFunds Mutual Fund Distributor App from Google Play Store or Apple App Store.
How to Select the Right Mutual Fund Distributor ?
Selecting a mutual fund distributor is a critical aspect of building a successful investment portfolio. Here are some essential guidelines to consider while choosing a mutual fund distributor:
- Evaluate the distributor's experience in the financial market to assess their competency and knowledge.
- Ask for referrals to validate their track record and quality of service.
- Look for a distributor who can understand your financial goals, background, and risk tolerance to develop a tailored investment strategy.
- Conduct thorough research before selecting a mutual fund advisor or distributor and avoid making hasty or impulsive decisions.
- Verify the validity of the documentation and terms related to the schemes offered by the distributor to gauge their integrity.
- Ensure that the distributor complies with the regulatory requirements set by AMFI and SEBI and possesses proper certification to prevent fraud or theft.
- The best mutual fund agent provides convenience to retail investors and assists them in managing their mutual fund portfolio efficiently. Hence, distributors should strive to acquire knowledge and experience in the financial market to help investors achieve their financial objectives while minimizing risks and maximizing returns.
If you have a genuine interest in the field of mutual fund distribution, pursuing a career in it can be a thrilling and rewarding experience.
Frequently Asked Questions about Mutual Fund Distribution
Q. How do I become a mutual fund distributor or agent ?
To become a mutual fund distributor in India, you must first register with the NISM and clear its Series VA Mutual Fund Distribution Certification Examination. Then you can apply for an ARN number with AMFI and partner with AMCs and other entities distributing mutual funds to start selling mutual fund schemes to your clients.
Q. What is the scope of the mutual funds business ?
With the rising popularity of mutual fund investments in India, MF distribution is undeniably an amazing business opportunity for anyone interested. Moreover, you need minimum educational qualification to become a MF distributor.
Q. How much does a mutual fund distributor earn ?
A distributor earns commission on all the investments made by his / her client. Thus, the possibilities are seemingly endless.
Q. What is the commission structure of Mutual Funds ?
A mutual fund distributor earn upfront as well as trailing commission on investments made by his/her clients. The mutual fund trailing commission structure is given above.
Q. Is it mandatory to clear NISM Series VA Exam for distributors ?
Yes. One must clear NISM certification exam and secure an ARN number before becoming a registered mutual fund distributor. You can enroll for an Online NISM courses to prepare for the exam.
Q. How to Start Mutual Funds Business with ZFunds ?
ZFunds is one of the fastest growing mutual fund distributors in India with a vast network on agents and advisors. You can download our mutual fund distributor business app from Google Play Store and Apple App Store and become a partner in our growth story.
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