Who is a Mutual Fund Distributor (MFD)

A Mutual Fund Distributor (MFD) also referred to as a Mutual Fund Agent is an authorised person who is assigned to recommend and sell mutual fund products to people. Only a MFD can legally recommend / sell mutual fund products to investors.

A MFD is the person who will guide the novice investor in the complicated processes of creating a folio in the mutual fund house, provide the right mutual fund scheme based on the investors needs and take actions (with the investors consent) on behalf of the investors.

What are the Roles and Functions of a MFD

A competent MFD can use their expertise to address the concerns and questions of investors.

Distributors of mutual funds must to do a thorough analysis of an investor’s profile before making customized investment suggestions. This guarantees that investors are knowledgeable about appropriate plans that fit their needs.

• Introducing the concept of mutual fund to people
• Completing the KYC Documentation of Investors
• Selecting the right mutual fund product
• Becoming a support assistant in future requirements

Why become a Mutual Fund Distributor

A MFD needs to have a solid understanding and knowledge in the area of investing in mutual funds. All mutual fund-related information is now readily available online, and investors compare funds even before they make an investment.

It is the mutual fund distributor who makes a folio (Mutual Fund Portfolio) for its clients and recommends mutual fund schemes based on the investor type, their goals and risk appetite.

How does a Mutual Fund Distributor make money

Mutual Fund Distributors are paid a percentage based commission on their Asset Under Management. (Asset Under Management or AUM is the sum of all investment by its clients). Thus, this percentage varies from mutual fund houses, type of investment scheme, durations of the investments etc.

MFDs receive commissions based on the investments made by their clients. These fees are usually paid as trail commissions, which last for the duration of the investment. Also, these commissions increase in tandem with clients’ investments.

How to become a Mutual Fund Distributor (MFD)

This blog will explain a step by step guide to become a Mutual Fund Distributor.

Minimum eligibility criteria

• The candidate needs to be at least 18 years or above
• Needs to clear the NISM Series VA Exam

Here is a Step by Step Guide to become a Mutual Fund Distributor

1. Clear the NISM Series V-A Exam
2. Register with AMFI (Association of Mutual Fund India)
3. Empanelment with Mutual Fund Houses
4. Establishing your firm (Optional)
5. Act like a consultant and not a salesman
6. Get softwares to manage your clients

Clear NSIM Series V-A Exam

The first step in becoming a mutual fund distributor is by cleaning the NISM Series V-A Examination. Therefore, it is important that the MFD is aware of the pros and cons of investing its investors capital in equity instruments.

Thus, SEBI (Securities Exchange Board of India) wants to ensure that the MFDs are aware of the mutual fund concepts are self aware before recommending the same to its investors.

NISM (National Institute of Securities Markets) conducts various exams in various divisions to allow people to rightly get awarded and recognised as experts.

The Series V-A Exam is called “Mutual Fund Distributor Certification Exam”. The Exam seeks to create a common minimum knowledge benchmark to all persons selling and distributing mutual fund products ¹.

A quick brief of the Series V-A Examination. The exam consist of 100 questions of 1 mark each and should be completed in 2 hours. The passing mark for the exam is 50 and there are no negative marks.

Click Here to Apply for NISM Series V-A “Mutual Fund Distributor Certification Exam”

Register with AMFI (Association of Mutual Fund India)

Once you have cleared the NISM Series V-A, you will get a certificate which will be needed to register with AMFI.

AMFI (Association of Mutual Funds in India) is a non-profit industry body of the asset management companies (AMCs) of all Mutual Funds in India that are registered with Securities and Exchange Board of India (SEBI)² .

Getting ARN Number

The next step after passing the NISM exam is to apply for an individual AMFI Registration Number (ARN) by registering with the Association of Mutual Funds in India (AMFI). This number is very important since it shows that you are a registered and certified distributor of mutual funds. Through the AMFI website, you can apply for the ARN by submitting the necessary paperwork and making the registration fee payment.

Click Here to Register with AMFI

Empanelment with Mutual Fund House

Once you receive the ARN Number you will be able to directly empanel with the different mutual fund houses in their distributor section, where a dedicated distributor portal will be available for you to track your investors portfolio, take actions on behalf of the investors and track your Asset Under Management (AUM).

Establishing your Firm (Optional)

Establishing your firm as a sole proprietor gives you an edge and makes you stand out as a mutual fund distributor. It looks like you not only sell mutual funds but as a firm that provides mutual fund consultation and helps people invest in mutual funds.

Having a firm (sole proprietor) gives trust to your clients. You can also start your social media marketing campaigns using your company names and provide educational content, stock market insights and your personal views to gain traction and reach new investors.

Act like a Consultant not a Salesman

Pitch your investment ideas to your investor like as if you are a consultant. Your clients interest needs to be at the top priority.

Consult with me

If you are keen on becoming a mutual fund distributor and still having some unanswered questions, I am here to help. I am a mutual fund distributor myself and I have walked the path.

I am organising 45 minutes 1:1 consultation so that we can have a can collectively discuss on your plans to becoming a mutual fund distributor.

Mail me at mail@atishlolienkar.com for more information (Paid).

Conclusion

Becoming a Mutual Fund Distributor is a great profession to start with if you want to enter the world of Financial Markets. One needs to understand that, the payouts / commissions earned by the Mutual Fund Distributor are directly proportional to the AUM (Asset Under Management) generated by them. Thus, during the initial stages the payouts will be very less and will continue to grow with time.

Do let me your a part of your experiences (mail@atishlolienkar.com). Subscribe to my Newsletter for latest updates.

1. Mutual Fund Distributors Certification Course Registration, India | NISM. (2023, September 26). National Institute of Securities Markets (NISM). https://www.nism.ac.in/mutual-fund-distributors/
2. Association of Mutual Funds in India | Indian Mutual Fund Industry. (n.d.). https://www.amfiindia.com/know-about-amfi