A Guide On Mutual Fund Distributor

Mutual Fund Distributors play an important role from guiding clients about best-suited mutual fund schemes to client onboarding. 

If you're passionate about guiding others toward financial success, then to be a mutual fund distributor could be a rewarding career path.

In this detailed guide, we will talk about who is a distributor and how to become a successful one.

Table of Content

1. Who is a Mutual Fund Distributor
2. How to become a Mutual Fund Distributor
3. What is Mutual Fund Distributor Commission 
4. Responsibilities and Role of a Mutual Fund Distributor 
5. How to become a Best Mutual Fund Distributor

1. Who is a Mutual Fund Distributor

A mutual fund distributor, also referred to as a mutual fund agent, serves as an intermediary between mutual fund companies and investors. 

A distributor would assist clients in finding mutual funds that fit their investment horizon, risk tolerance, and financial objectives. They also offer guidance, continuous assistance and investment updates.

Their function is essential since a lot of investors are confused by mutual funds and require guidance with their investments in various schemes. 

Their main duties consist of:

Guidance

Assisting clients in understanding various mutual funds and how they fit into their overall financial strategy. 

Distributing Mutual Funds

Handling transaction processing and helping investors invest in mutual funds.

Ongoing help

On-going support involves letting clients know how the funds are doing and also helping them make changes to their investment mixture.

2. How to become a Mutual Fund Distributor

One has to fulfil a few requirements in order to become a mutual fund distributor.

NISM Series V-A exam

To work as a mutual fund distributor, one must pass the (NISM) Series V-A: Mutual Fund Distributors Exam. This certificate ensured the distributor's proficiency with financial markets and mutual funds. It is mandatory to renew the certificate every three years.

Enrol with Association of Mutual Funds in India

Applying for an AMFI Registration Number (ARN) by registering with the Association of Mutual Funds in India (AMFI) is the next step after earning certification. This step grants a person the authority to operate as a mutual fund distributor

Associate with mutual fund companies

Distributors have to empanel with each mutual fund company. Alternatively, they can partner with a mutual fund distributor company and can use their online investing platform.

Are you interested in entering the world of mutual funds but unsure where to start? Partnering with a national distributor like Prudent Corporate is the best way to give a kick-start to your mutual fund distribution business.

3. What is the Mutual Fund Distributor Commission?

Mutual Fund Distributor Commission is what distributors earn by guiding their clients. There are two types of commission:

Upfront Commission

A distributor receives payment in advance when investors invest in a mutual fund. This amount is paid just once.

The commission amount is based on investment by clients and types of mutual fund. The distributor receives this commission for their efforts in helping investors with the fund selection process and onboarding them. However, AMFI has now banned upfront commission and is no longer in force. 

Trail Commission

A trail commission is a regular payment. The distributor gets it as long as the investor stays invested in the different mutual fund schemes.

This mutual fund distributor commission gives the distributor a consistent flow of money and is usually expressed as a percentage of the assets under management (AUM).

The trail commission motivates distributors to offer investors ongoing assistance and support, establishing a lasting relationship that matches the distributor's objectives with the investor's investing objectives.

4. Responsibilities and Role of a Mutual Fund Distributor

• Knowledge and Expertise
  
  A distributor of mutual funds must have a deep understanding of many mutual fund schemes. They need to know their features, advantages, risks, and track record. They need to know about current market trends as well. They need to know the law and the investing process.
  
  Client Emotions

Investing in mutual funds is not just about numbers—it's also about emotions. Market fluctuations can make clients anxious, leading them to make rash decisions. A mutual fund distributor must help clients stay calm during market downturns.

Investors often share stories about how sticking with their investments has paid off over time And they can show historical trends that highlight how markets bounce back after downturns.

By keeping their emotions in check, they help clients stay on track with their financial goals and not get distracted by short-term market ups and downs.

Client Education

Not every client is familiar with the terminologies of mutual funds or investment. Mutual fund distributors should make clients understand these in a simple and easy manner. Clients who receive education are better equipped to make wise selections and feel more confident about their investments.

 Client Onboarding

Distributors must bring clients up to speed on the required paperwork. This includes KYC (Know Your Customer) and other rules. They should make sure to gather all needed data. This includes the investors' risk tolerance, financial goals, investment horizon, and personal information.

Suggestion of Suitable Investments

Distributors should suggest mutual fund schemes that fit an investor's goals. They should fit the investor's time horizon, risk tolerance, and financial circumstances. 

The recommendations should reflect the investor's profile and preferences. When making recommendations, they must consider the cost. They must also consider the mix of assets, the record, and the fund's performance. 

Timely overview

Mutual fund distribution business requires a consistent overview of a client's portfolio. To maximise the investor's returns, they should also suggest any needed changes. 

For instance, if a particular fund has been underperforming consistently, the distributor may suggest switching to a better-performing fund to optimise returns. Regular reviews help clients feel confident that their investments are being closely monitored and adjusted when necessary.

Client service and support

Distributors should give clients quick, accurate help with their investments. This help should cover questions and issues about mutual funds.

They should help with all parts of investing. This includes transaction facilitation, investment tracking, and investor dispute resolution.

Ongoing Professional Development 

Distributors must stay up to date on market trends, laws, and mutual fund advances. They must do so as part of their ongoing professional development.

To improve their knowledge and abilities, they should pursue ongoing professional development. One can do this by taking training courses, attending conferences, and obtaining certifications.

6. How to Become The Best Mutual Fund Distributor

Stay updated

The financial world is always changing, with new investment trends and mutual fund products emerging regularly.

To be the best mutual fund distributor, staying updated on these trends is crucial. This allows them to offer relevant, timely advice to their clients and build their trust.

One can sign up for industry newsletters, attend financial webinars or follow credible investment blogs to stay ahead.

Create informational YouTube videos

To stand out and attract more clients, consider creating a YouTube channel where one can explain mutual fund concepts in simple, easy-to-understand language.

Video content helps build trust and credibility, as potential clients see a distributor as a knowledgeable source of information. Videos can range from explaining “How to Start a SIP” to “Which Mutual Funds Are Best for Beginners.”

Offer tailored investment solutions

Every investor has a different perspective. Some of them might be looking for retirement savings, or creating wealth for the child's education. 

But to be the top mutual fund distributor, one must recommend customised investment plans for each client based on specific goals, time horizon, and risk tolerance.

Instead of generic guidance, provide specific recommendations. For instance, if the client does not wish to take risks, then debt funds or conservative hybrid funds can be good rather than aggressive equity funds.

Use social media 

Social media is an effective way to interact with prospective clients and inform them about mutual funds.

One can publish useful content, such as investment advice, success stories, or responses to frequently asked financial issues, on social media sites like Facebook, Instagram, and LinkedIn. 

Maintain consistent communication with clients

Regular communication is essential to establishing lasting connections. Send newsletters, updates, or even a brief WhatsApp message to your clients to keep them updated on the performance of their assets.

Additionally, follow up on a regular basis. Distributors need to review their financial objectives and see whether any modifications are required.

Do good for the client, and success will follow

At the heart of being a great mutual fund distributor is genuinely caring about their client’s success. One should prioritise the client's best interests and then their loyalty and trust will naturally follow.

Be honest about potential risks, avoid overpromising. Always be transparent about the fees and commissions involved.

Remember, word-of-mouth referrals can be the most powerful form of marketing.

Conclusion

Mutual fund distributors act as intermediaries between mutual fund companies. They help clients select suitable funds based on their goals and risk tolerance. 

To become a distributor, one must pass the NISM exam and register with AMFI. Earning commissions through trail commissions provides ongoing income. 

Successful distributors provide tailored investment solutions, stay updated on trends, and maintain client communication.

By prioritising client interests, distributors can build long-lasting relationships and grow their business.