4 Benefits of Mutual Fund Distribution Business

The Mutual Fund industry has witnessed sharp growth in the last two decades. As per AMFI, the Assets Under Management (AUM) of the sector was Rs 1.01 lakh crore on 31st March 2002, and now, on 31st July 2024, it is Rs 64.97 lakh crore, indicating an increase of 20.48%*. Moreover, CAMS data shows that investors have increased by 19.58% in the past seven years (March 2017 - June 2024, Source:- CAMS).

Despite the rapid growth of the industry, the number of investors remains quite low. The number of investors at 4.69 crore, juxtaposed to India’s population of 144 crore, indicates the steep under-penetration of mutual funds in India (AMFI & TOI, June 2024). Moreover, India’s AUM to GDP ratio of 15.9% is in stark contrast to the AUM to GDP ratio of the US, Singapore, and the UK, at 148.9%, 179.9%, and 74.8%, respectively (Source: Cafemutual, March 2022).

This indicates that the mutual fund industry in India is still at a nascent stage. The growth potential of this industry is high. Currently, there are just 1.61 lakh mutual fund distributors (AMFI, as on 31st June 2024) in the country compared to India’s population of 144 crore. This means just 1 distributor for every 9000 people. As more investors join the industry, the need to guide them will also increase, and so will the need for mutual fund distributors. Now, let’s look at what mutual fund distribution is-

What is a Mutual fund distribution business?

The mutual fund distribution business involves the sale and recommendation of mutual funds to investors. Mutual fund distributors act as a bridge between investors and asset management companies, making transacting easier. They understand the financial position, financial needs, and risk profile of investors to guide them in making the right mutual fund investments. They also impart financial literacy among investors, facilitating the industry’s growth.

Mutual fund distributors play a vital role by providing valuable guidance to investors and helping them achieve their financial objectives. They have played a key role in catalysing industry growth, putting them at the heart of this industry. The mutual fund distribution business offers a rewarding career to both the distributor and the investor to build wealth.

Here are some of the key benefits:

• Ownership - A mutual fund distribution business is not like a traditional job role; it gives you the freedom to be your own boss. The distributor does not have the pressure to perform as per targets. He can work at his convenience and will. Distributors have the flexibility to grow their business as per their passion and calibre and achieve the scale of business that they are capable of without any limits.

• High-Income Potential - This industry has a unique commission system known as trail commission. This commission is paid only on a monthly basis. 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 in the form of higher commissions. 

The table below demonstrates how trail commission works. If an initial investment of Rs 1,00,000 was made 15 years ago, the trail income in the first year would have been e Rs 788, Rs 888 in the next year, and so on. The cumulative income at the end of 15 years would have been Rs 30,953. (Assumption: Market Growth: 12.64%, Trail: 0.70%)

Past performance may or may not be sustained in future and is not a guarantee of any future returns.

• Personal Satisfaction - Mutual fund distribution provides a great sense of satisfaction, apart from financial fulfilment. It allows for making an impact on clients. Distributors guide investors to fulfil their short-term & long-term financial needs. Having the opportunity to fulfil financial needs and change someone’s life can give a wholesome feeling to the distributor.

• Work-Life Balance - Mutual fund distributors are the captains of their own ships. They can manage their hours, and they have complete freedom to choose their place of work where they feel most comfortable. This flexible power helps to balance their personal and professional lives.

Conclusion:

The mutual fund distribution business provides a fulfilling career opportunity for individuals of all ages and backgrounds. It requires a passion for helping others build wealth and offers high growth potential, unlimited income, and flexibility. Distributors can start their business by empanelling with AMCs or by empanelling with a large mutual fund distribution platform like NJ Wealth. NJ Wealth is a well-established mutual fund distributor network with 3 decades of experience. Currently, it has 41,000+ active mutual fund distributors. Moreover, NJ Wealth offers comprehensive 360-degree support in terms of sales, marketing, technology and assigns a dedicated relationship manager to assist in building investor relationships. Start your own mutual fund distribution business with NJ Wealth and embark on a fulfilling and rewarding journey.

FAQs

1) What is a mutual fund distribution business?

The mutual fund distribution business involves recommending and guiding investors in making the right mutual fund investments. Distributors understand investors' financial position, financial needs, and risk profiles to guide them in making the right investments.

2) How can I earn as a mutual fund distributor?

The table below demonstrates how trail commission works. If an initial investment of Rs 1,00,000 grows at the rate of 12.64%, compounded annually, the trail income in the first year will be Rs 788, Rs 888 in the next year, and so on. The cumulative income at the end of 15 years would be Rs 30,953.

3) How can I become a mutual fund distributor with NJ Wealth?

You can become an NJ Wealth mutual fund distributor in 3 easy steps: 

1.  Enroll with NJ Wealth 
2.  Pass the NSIM Series V-A mutual fund distributor certification exam. 
3.  Obtain the AMFI registration number (ARN).
4. Start your own mutual fund distribution business.