Mutual Funds have become one of the most preferred investment instruments for creating wealth, in the modern age. The Mutual Fund industry has been witnessing sharp growth. According to a report recently published by Mordor Intelligence, a market research firm, the AUM in India’s mutual fund industry has grown fourfold in a decade (2010-2020) and is expected to increase by another fourfold by 2025. The Indian mutual funds industry has the potential to cross INR 100 trillion in AUM before 2030.
Despite the growth in MF investors in the number of investments in mutual funds, the number of distributors catering to investors is less. With only about 1.25 lakh mutual fund distributors as of now, the reach is limited. There is a huge supply and demand gap which creates great career opportunities.
Mutual fund distributors generate a revenue source for themselves via the attractive commission structure in place for them, which is known as “Trail Commission”. This commission is quite unique in nature and the payout is done on a monthly basis. The 2 biggest advantages of this commission are:
a. It is calculated on the market value of the investment.
b. One gets commission as long as the client is holding onto his investment in the market.
Another unique feature which sets it apart from other financial products is the power of compounding, which helps in growing the earnings of a mutual fund distributor exponentially.
So, for example, if a mutual fund distributor is managing client investments of around Rs. 50 crore (equity), he/she would get a monthly trail income of around Rs. 2,50,000. This income will increase based on movement of stock market and new business brought by him/her.
Thus, the total commission of a mutual fund distributor depends on the number of clients and the total value invested by these clients. A distributor earns commission on every penny he/she brings in.
Distributors remain the primary means for fund houses to acquire customers; therefore fund houses are more than happy to support distributors. Most fund houses also have a rich resource section on their websites to help investors as well as distributors. Since there are a wide variety of funds to cater to every type of need, the selling aspect of distribution is intrinsically facilitated too.
Opting for a career as a mutual fund distributor has many advantages such as being your own boss, earning passive income, etc. Also, one has the flexibility to earn the income as per his/her goals as the payment is subjective of selling maximum schemes.
Besides investing in mutual funds, the distributor helps investors execute investment transactions, redemption, and switch between funds. The functions of a distributor are authorised by the Securities and Exchange Board of India (SEBI). As a mutual fund distributor, they can help their clients generate wealth over the long term and in turn be rewarded with an enriching career.
Becoming a mutual fund distributor needs less than Rs. 5,000 as initial investment. Over time a combination of legacy business, new flows, and market appreciation could help mutual fund distributors grow their earnings at an exponential rate. Market appreciation alone would have grown a Mutual Fund Distributor’s earnings from X to 16X over the past 20 years.
To conclude, if you are planning to be an entrepreneur in a noble profession, you should definitely think about being a Mutual Fund Distributor. Unlike any other business which are transaction based, this business will yield you commission till the time the investor remains invested in Mutual Funds. Moreover, with the “India Growth Story” your brokerage income will rise, with the rise in markets in the long run.
