Becoming a Mutual Fund Distributor in India: Step to Success

The financial services industry offers a variety of career paths. Some professionals focus on insurance, specializing in areas like car or health coverage. Others may choose to advise clients on investments, potentially becoming distributors, agents, or advisors for mutual funds.

It’s worth noting that those who work in the Mutual Fund industry are referred to as Mutual Fund Distributors (MFDs) according to SEBI regulations. The use of terms like “Mutual Fund Agent” or “Mutual Fund Advisor” is prohibited.

Considering a Career as a Mutual Fund Distributor?

If you’re interested in a career helping people invest in mutual funds, here are some key questions to explore:

• Advantages of the Role: What are the potential benefits of becoming a mutual fund distributor, such as earning potential, flexibility, or career growth?
• Compensation Structure: How do mutual fund distributors typically earn income, and what factors might influence their earnings?
• Licensing Requirements: What certifications or licenses are required to become a mutual fund distributor in your region?

By addressing these questions, you can gain a comprehensive understanding of what a career as a mutual fund distributor entails.

Advantages of Becoming a Mutual Fund Distributor:

There are several potential benefits to consider if you’re interested in becoming a mutual fund distributor:

• Earning Potential: Mutual fund distributors can earn a competitive income through commissions. One common commission structure is ongoing trail commissions. These commissions are a percentage of the value of a client’s assets that are under the distributor’s ARN Code. With a growing client base and strong sales performance, the earning potential can be significant.
• Flexibility: This career path often offers flexibility in terms of work schedule and location. This can be appealing for those who value autonomy and control over their workday.
• Career Growth: The financial services industry offers opportunities for advancement. As a successful distributor, you could build a strong client base and potentially move into wealth management or other financial advisory roles.
• Making a Difference: By helping clients invest in mutual funds, you can play a role in their financial well-being. Distributors can provide valuable financial education and guidance, empowering clients to achieve their long-term financial goals.

As a Mutual Fund Distributor/Agent, your Job Profile:

• Educate investors on available investment options: This includes explaining the features, benefits, and risks of various mutual fund schemes compared to other investment products like bank fixed deposits, EPFs, ULIPs, equities, and bonds.
• Guide investors through the investment process: Assist them with buying, switching, and redeeming mutual fund units, ensuring they understand the implications of each action.
• Provide ongoing performance monitoring and support: Regularly update investors on the performance of their investments, address their concerns, and offer guidance based on their evolving financial goals and risk tolerance.
• Stay informed and adapt to market dynamics: Continuously learn about industry trends, economic developments, and regulatory changes to provide clients with accurate and timely information to make informed investment decisions.

Steps to Becoming an Mutual Fund Distributor:

Pass the NISM Series V-A Exam: 

This mandatory exam tests your knowledge of mutual funds. You can register online through NISM and prepare using their study materials or other resources.

• Eligibility Criteria for Obtaining Certificate
  • The age of the candidate should be at least 18 years.
  • Candidates should be at least 12th passed.
  • Candidates who are 10th pass and have done 3 years Diploma are also eligible to become Mutual Fund Agent.
• First Registration for NISM Series V-A:
  • Visit the NISM website: Access the official NISM website (https://www.nism.ac.in/nism-certifications/) and locate the registration page for the Series V-A exam.
  • Pay the exam fee: The registration fee is Rs. 1,500. You can make the payment online using various payment methods.
  • Complete the online registration form: Fill out the application form accurately, providing your personal details and educational qualifications.
  • Download study materials: Upon successful registration, NISM will send you an email with login credentials. Access your online portal to download official study materials for the exam.
• Passing the NISM Series V-A Exam:
  • Format: The exam consists of 100 multiple-choice questions worth 1 mark each.
  • Passing score: You need to score at least 50% (50 marks) to pass.
  • Duration: You have 2 hours to complete the exam.
  • Delivery: The exam is conducted online.
  • Results: You will receive your results immediately upon completing the exam.
  • Certificate validity: The certificate you receive after passing is valid for 3 years.

Obtain ARN (AMFI Registration Number):

After passing the NISM Series V-A exam and receiving your certificate, you need to secure an ARN (AMFI Registration Number) from the Association of Mutual Funds in India (AMFI). This authorizes you to legally sell mutual funds in the country.

Here’s what you need to do:

1. Download the AMFI Registration Form: You can download the form from the official AMFI website (https://www.amfiindia.com/) or obtain it from the CAMS website (https://www.camsonline.com/).
2. Fill out the form and gather required documents: The form will list all the required documents, which typically include:
   • Your NISM Series V-A certificate
   • Address proof
   • PAN card
   • Three passport-sized photographs
   • Cancelled cheque with your name printed clearly
   • Demand Draft (DD) for Rs. 3,000 payable to “Association of Mutual Fund in India” at the CAMS location.
3. Submit the application: Submit the completed form and all necessary documents either in person at the CAMS office or through their online portal (if available).

Processing and Next Steps:

• AMFI will process your application and conduct a KYD (Know Your Distributor) verification. This biometric process verifies your identity.
• Once approved, you will receive your ARN card by mail.
• With your ARN in hand, you can proceed to the next step: empanelment with specific mutual fund houses.

Empanel with Mutual Fund Houses: 

Obtaining your ARN card allows you to work for various mutual fund companies, not just one. However, to receive commissions for selling their specific mutual funds, you need to empanel with each individual fund house (AMC) you want to work with.

Here’s how empanelment works:

1. Choose your fund houses: Research and select the AMCs whose offerings you want to represent.
2. Check empanelment methods: Each fund house may have its own empanelment process, either offline through a downloadable form or online through their website.
3. Complete the process: Follow the specific instructions provided by each fund house. This usually involves submitting an application form, relevant documents, and potentially undergoing additional training.
4. Read detail Guide – Empaneling with AMCs: Simplified Steps for Mutual Fund Distributors

Once empanelled, you’ll be authorized to sell the mutual funds offered by that specific fund house and earn commissions for your sales.

Bonus Point : The recent notification from AMFI states that failing to empanel will render your application invalid, and it will be treated as a direct investment.

Here is detail article Mutual Fund Distributors’ Guide to Empanelment with AMCs for this topic.

How much can you earn as a Mutual Fund Distributor (MFD)?

Commission Structure:

• Variable based on type of fund: Commissions range from 0.02% (two paise) to 1.00%, depending on the fund category (equity, debt, ELSS, liquid, etc.).
• Trail-based system: Commissions are typically paid monthly based on your Assets Under Management (AUM), not upfront fees.

Earnings Examples:

• Starting out: With a smaller AUM (e.g., Rs. 1 lakh), your monthly commission could be between Rs. 20 and Rs. 1,000.
• Experienced MFDs: With a larger AUM (e.g., above Rs. 10 crore), commissions can reach Rs. 1 lakh per month or more.

Factors Affecting Earnings:

• Hard work and dedication: Building a successful career as an MFD requires consistent effort and a commitment to serving clients well.
• Regulatory changes: Regulatory updates can impact commission rates and industry practices.
• Market competition: The number of MFDs seeking clients can affect competition in the market.

Factors Influencing Earnings:

• Sales Performance: The more investments a distributor sells, the higher their overall commissions will be. This includes both the number of new clients acquired and the amount each client invests.
• Type of Mutual Fund: Commissions can vary depending on the specific mutual fund being sold. Some funds may offer higher trail commissions than others.
• Client Base: The size and wealth of a distributor’s client base significantly impact their earnings. Distributors with a larger client base managing substantial assets will typically earn more.
• Experience and Reputation: Experienced and well-respected distributors may be able to negotiate higher commission rates with fund houses.
• Market Conditions: Overall market performance can influence investor behavior and investment activity. Strong bull markets can lead to increased sales and higher commissions for distributors.

Conclusion

Becoming an MFD requires passing an exam, obtaining licenses, and ongoing learning. It can be a rewarding career path for individuals passionate about helping others navigate the financial world.