Mutual funds have gained significant popularity as a preferred investment option for wealth accumulation in the last 2 decades. The mutual fund industry has experienced substantial growth, as indicated by a recent report from Mordor Intelligence, a market research firm. The Assets under Management (AUM) in India's mutual fund industry have quadrupled over a period of ten years (2010-2020) and are projected to undergo a similar expansion by 2025.
In recent years, the industry has experienced significant growth, thanks to increased awareness amongst investors through campaigns like “Mutual funds sahi hai”. Additionally, mutual fund distributors have played a significant role in reaching out to new customers and guiding them in choosing the suitable scheme for them. The task of a distributor is to analyse the financial needs and risk profile of the clients and provide guidance to fulfil their financial needs in the most efficient way possible with the help of mutual funds.
Although the Indian mutual fund industry has experienced significant growth, its Asset Under Management (AUM) remains relatively low compared to developed countries. According to AMFI and the World Bank (2021), India's AUM to GDP ratio stands at 17%, while the US, France, and the UK boast ratios of 140%, 80%, and 67%, respectively. This indicates a relatively low penetration of mutual fund investors in India and underscores the potential for growth in the industry, creating a greater demand for mutual fund distributors. Surprisingly, despite this potential, the number of mutual fund distributors in India is only around 1,31,000, resulting in just one mutual fund distributor for every 10,000 individuals (AMFI, 2022). This scarcity of distributors presents a significant opportunity for individuals aspiring to build a career as a Mutual Fund Distributor in India.
The mutual fund distribution business offers a plethora of benefits, making it a sustainable career choice -
- Be your own boss - Becoming a mutual fund distributor is more like a profession and can give you the freedom of being your own boss. A certified mutual fund distributor can start their own mutual fund distribution business and retain control since they choose the vision, mission, values, and goals of the company. Moreover, there is flexibility in the working hours, and distributors have the opportunity to choose their own clients. Some distributors can be empanelled with AMCs, while others associate with platforms that are equipped with services like tech support, customer care, and marketing, among other services.
- Trail Commission - Trail commission is a form of ongoing commission that is paid to mutual fund distributors for managing and servicing a client's investment portfolio. It is typically a percentage of the assets under management and is paid regularly as long as the client continues to hold the investment. Trail commission is calculated on the basis of the market value of the portfolio, hence incentivising the mutual fund distributor to work in the best interest of their clients.
- Unlimited income potential - When you work for a company, your income is limited by your salary and bonuses. However, when you run your own mutual fund distribution business, your income potential is unlimited. Your income is directly proportional to the business that you bring in; hence, your income depends on your skills, expertise, and business acumen.
- Satisfaction - Mutual fund distribution is a noble business since the main task of the distributor is to help their clients achieve their financial dreams. Distributors’ income grows when the investors’ portfolio grows. Hence, the interests of a distributor are completely aligned with the financial well-being of their clients. When distributors contribute to fulfilling the dreams and financial needs of their clients, they can have the satisfaction that they are not just working to earn, but they are working to spread happiness amongst the masses.
Mutual fund distribution is a wholesome profession that offers individuals personal and financial satisfaction. Distributors have the option to affiliate directly with Asset Management Companies (AMCs) or partner with national distributors who provide essential services like tech support, customer care, and marketing. The profession is open to individuals aged 18 and above, ranging from college students to housewives, who have cleared the NISM V-A mutual fund distribution examination and registered with AMFI to launch their mutual fund distribution business. AMFI predicts that the mutual fund industry in India has the potential to surpass an Asset Under Management (AUM) of 100 trillion by the end of the decade, creating ample career opportunities for those considering entering the distribution sector. This article aims to provide a comprehensive understanding of the mutual fund distribution business, inspiring and motivating individuals to pursue a career in this promising industry.
