Becoming A Mutual Fund Distributor - The Why, How & What

Becoming A Mutual Fund Distributor

As a one-of-a-kind career choice, mutual fund distribution opens many doors for its pursuers. Here’s a detailed article on the why, how and what of becoming a mutual fund distributor.

What is a mutual fund?

A mutual fund is a kind of investment that pools money from many investors to invest in an assortment of assets like stocks, bonds, or other securities. This pooling allows individuals to diversify their investments and access a more expansive range of strategies or assets than they might be able to do on their own.

A mutual fund creates a portfolio from the money that is pooled by different investors. So when someone buys into a mutual fund, he acquires part-ownership of all the underlying assets of the schemes in which he has invested. This gives the investor access to a much wider stretch of the market through a single mutual fund investment as opposed to what they might be able to purchase individually.

By investing money into a mutual fund, investors can partake in a professionally managed, diversified group of securities that they wouldn't usually have access to as individuals. This diversification and access is an important benefit of mutual funds for individual investors.

What is mutual fund distribution?

Mutual fund distribution is a professional business which helps investors to buy and sell mutual funds. Under this line of work, a mutual fund distributor has the advantage of flexibility and high potential for growth and income. They act as independent agencies and entrepreneurs who guide their clients with the best knowledge about investment in mutual funds.

Mutual fund distributors stay in touch with the trends in the market and help their clients as intermediaries, guiding them to make informed decisions in fulfilling their financial needs. They earn a trail commission, with the payout released monthly. It is calculated on the market value of the client’s investments and is received as long as the investor stays invested. Over time, as the investment value grows, the distributor also benefits through higher commissions.

Who can become a mutual fund distributor and how?

Anybody, from a housewife and a fresher to a retired professional and a salaried employee, can become a mutual fund distributor; all they need is passion and the willingness to learn and grow. The primary function of a mutual fund distributor is to analyse the investors' financial needs and risk appetite and guide them in making the right investment decisions regarding mutual funds. Crediting the cruciality of a mutual fund distributor’s role in building wealth, SEBI has made it compulsory for all aspirants of mutual fund distributors to clear a certification exam.

This certification course is conducted by the National Institute of Securities Markets (NISM) and is called the NISM Series V-A Mutual Fund Distributors Certification Examination. Anyone can take this exam irrespective of their occupation, gender or location. It assesses the knowledge and skills of individuals who wish to sell and distribute mutual funds in India.

After clearing the NISM distributor exam, one must complete the mandatory KYD (Know Your Distributor) process and apply to AMFI for an AMFI Registration Number (ARN) to begin offering mutual fund and initiating investor investments. An individual must be above the age of 18 years to obtain an ARN.