Mutual fund distributors (MFDs) are individuals or entities who act as intermediaries between mutual fund companies and investors. They help us, as investors, to purchase and manage mutual fund investments. So, whether to educate investors about mutual funds or advise and sell regular mutual fund schemes, mutual fund distributors can do it all. Let’s understand how you can become a mutual fund distributor, the steps required for certification
What is a Mutual Fund Distributor?
A mutual fund distributor (MFD) acts as a bridge between mutual fund companies also known as asset management companies (AMCs) and investors. They help you buy, sell, and manage mutual fund units. These professionals can guide you in the world of mutual funds.
MFDs are certified professionals who are registered with the Association of Mutual Funds in India (AMFI) and adhere to ethical standards as set by the Securities and Exchange Board of India (SEBI). They can either work as individuals or as part of larger firms.
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Role of a Mutual Fund Distributor
Now, let’s understand what the role of a mutual fund distributor is:
1. Educating Investors
Mutual fund distributors let investors know about the various mutual fund schemes, their benefits, risks and fund performance over the years.
2. Professional Advice
Based on an investor’s financial goals, risk tolerance, and time horizon, MFDs recommend suitable mutual fund schemes.
3. Assistance with Transactions
They help investors buy, sell, or switch between mutual fund schemes and manage the necessary paperwork.
How Does a Mutual Fund Distributor Earn?
Mutual fund distributors sell regular mutual funds on which they earn commissions from the AMCs they represent. These commissions, also known as trail commissions or mutual fund distributor commissions, are paid over the life of the investment. The longer the client stays invested, the more the distributor earns.
Additionally, some MFDs may charge fees for their services. However, most of their income comes from the commissions they receive for each investment made by their clients.
How to Become a Mutual Fund Distributor?
If you are interested in becoming a mutual fund distributor, here are the steps you need to follow:
1. Pass the NISM-Series-V-A Exam
This certification ensures that you have the foundational knowledge to guide investors in mutual funds.
2. Obtain an AMFI Registration Number (ARN)
After passing the exam, you must register with the AMFI to get your ARN, which officially qualifies you as a mutual fund distributor.
3. Sign Up with Asset Management Companies (AMCs)
Once you have your ARN, you can sign up with various mutual fund companies to start distributing their schemes.
FAQs
What is a mutual fund distributor?
A MFD is a certified professional who helps individuals buy and manage mutual fund investments.
How can I become a mutual fund distributor?
To become a mutual fund distributor, you must pass the NISM-Series-V-A: Mutual Fund Distributors Exam. To do that, you will have to register with AMFI to get an ARN and add your distributor license with mutual fund companies.
What is the mutual fund distributor exam?
The mutual fund distributor exam, known as the NISM-Series-V-A exam, is a certification required to qualify as a mutual fund distributor in India.
What kind of mutual funds can mutual fund distributors sell?
Mutual fund distributors earn commissions from mutual fund companies on the investments they help clients make. These are usually trail commissions, which are paid over time.
What is the mutual fund distributor commission?
The commission is a percentage of the assets under management that MFDs earn from the mutual fund company. It increases as the client’s investment grows.
What is the minimum qualification to become a mutual fund distributor?
You must be at least 18 years old and have passed the 10+2 examination to qualify. Additionally, you must clear the NISM-Series-V-A exam.
Is a mutual fund distributor the same as an investment advisor?
No, mutual fund distributors can only sell mutual funds, whereas investment advisors provide comprehensive financial planning across various investment products.
What is the AMFI Registration Number (ARN)?
ARN is a unique number issued by the Association of Mutual Funds in India, which allows an individual to officially act as a mutual fund distributor.
Do mutual fund distributors charge fees?
While some distributors may charge fees for their services, most of their income comes from commissions earned from the mutual fund companies.
Wrapping Up
A mutual fund distributor can be helpful for investors who want to understand the world of mutual funds. They simplify the investment process and help newbie investors make the right decisions based on their financial goals. By becoming a mutual fund distributor, you not only help investors earn money but also form the financial future of the economy.
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DISCLAIMER: Mutual Fund investments are subject to market risks. Read all scheme related documents carefully. Registration granted by SEBI, membership of BASL (in case of IAs) and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors. Investments in securities market are subject to market risks. Read all the related documents carefully before investing. The securities quoted are for illustration only and are not recommendatory.
