The Role of Mutual Funds Distributors in India

Mutual funds are one of the most popular investment options in India, offering a variety of schemes to suit different risk profiles, goals, and time horizons. However, investing in mutual funds can be a daunting task for many investors, especially those who are new to the market or lack adequate financial knowledge. This is where mutual fund distributors come in handy.

A mutual fund distributor is an individual or an entity that acts as a bridge between the mutual fund houses and the investors. They help investors with various aspects of mutual fund investments, such as:

• Creating awareness and educating investors about the benefits, risks, and features of different mutual fund schemes.
• Helping investors choose the right mutual fund scheme based on their risk appetite, investment objective, and financial situation.
• Assisting investors with the purchase, switch, and redemption of mutual fund units.
• Providing regular updates and feedback on the performance of the mutual fund schemes and the market conditions.
• Resolving any queries or issues that investors may have regarding their mutual fund investments.

What are their duties and responsibilities, and how much commission they can earn from selling mutual funds.

## How to become a mutual fund distributor?

To become a mutual fund distributor, one has to fulfill the following criteria:

• Be at least 18 years old and have a valid PAN card.
• Register with the Association of Mutual Funds in India (AMFI) and obtain an AMFI Registration Number (ARN).
• Pass the NISM-Series-V-A: Mutual Fund Distributors Certification Examination conducted by the National Institute of Securities Markets (NISM).
• Submit an application form along with the required documents and fees to the desired Asset Management Company (AMC) for empanelment.

Once empaneled, a mutual fund distributor can start selling mutual funds of that AMC to investors. A mutual fund distributor can also empanel with multiple AMCs to offer a wider range of products to investors.

## What are the duties and responsibilities of a mutual fund distributor?

A mutual fund distributor has to perform various duties and responsibilities, such as:

• Understand the needs and goals of the investors and suggest suitable mutual fund schemes that match their profile.
• Explain the features, benefits, risks, charges, and tax implications of the mutual fund schemes to the investors in a clear and transparent manner.
• Help the investors fill up the application forms and submit them along with the necessary documents and payments to the AMC or its registrar.
• Track the status of the transactions and inform the investors about the confirmation, allotment, or rejection of their applications.
• Provide after-sales service to the investors, such as updating them on their portfolio performance, sending them account statements, facilitating switches or redemptions, handling complaints or grievances, etc.
• Follow the code of conduct and ethical standards prescribed by AMFI and NISM while dealing with investors and AMCs.

## How much commission can a mutual fund distributor earn?

A mutual fund distributor can earn commission from two sources:

• Upfront commission:This is a one-time commission paid by the AMC to the distributor at the time of selling a mutual fund scheme. The rate of upfront commission varies from scheme to scheme and depends on factors such as type of scheme (equity or debt), tenure of investment (short-term or long-term), type of plan (regular or direct), etc. The upfront commission can range from 0% to 6% of the investment amount.
• Trail commission:This is a recurring commission paid by the AMC to the distributor every year as long as the investor stays invested in the mutual fund scheme. The rate of trail commission also varies from scheme to scheme and depends on factors such as type of scheme, tenure of investment, type of plan, etc. The trail commission can range from 0.1% to 1.5% of the average assets under management (AUM) of the scheme.

The commission earned by a mutual fund distributor is subject to tax deduction at source (TDS) as per the applicable income tax laws.

## Conclusion

A mutual fund distributor is a person who helps investors choose and invest in mutual funds that suit their goals and risk appetite. A mutual fund distributor acts as a bridge between the mutual fund houses and the investors, and provides them with information, guidance and support. A mutual fund distributor has to clear a certification exam and follow certain regulations while selling mutual funds. A mutual fund distributor can grow his or her business by building trust and loyalty with the investors and offering them value-added services and solutions.

Mutual fund distributors are governed by SEBI and AMFI, which are the regulatory bodies for the mutual fund industry in India. They have to adhere to certain norms and standards to ensure transparency and fairness in their dealings. They also have to pass a certification exam conducted by NISM, which is the educational arm of SEBI, to become eligible to sell mutual funds.

Mutual fund distributors contribute to the growth and development of the mutual fund industry in India by expanding its reach and accessibility to various segments of investors, especially in the under-served areas. They also contribute to the financial education and awareness of the investors, which can help them make better financial choices and achieve their financial goals.