Mutual Funds Distributor

Mutual Funds Distributor

Mutual funds are a relatively safer investment option as opposed to trading in stocks that are prone to high risks. This makes it a popular investment option for many early investors. A mutual fund distributor helps facilitate the sale of mutual funds schemes by bringing in potential investors to the mutual fund provider. 

Who are mutual fund distributors? 

Mutual fund distributors are organisations that act as an intermediary that helps potential investments buy and sell mutual funds schemes. They not only help them profit from their investment but also help grow their investment portfolio. They help mutual funds providers find investors who can help them raise cash for their projects or the company itself. They help facilitate the purchase, sale, trading and more, and earn a commission from the users for every sale, purchase and trade they make. 

Understanding mutual fund distributors 

Mutual funds distributors act as an intermediary between the investor and the mutual fund providers and aid in the sale and purchase of mutual funds schemes. For mutual funds provider to raise money, they need investors who will purchase their mutual fund schemes and mutual fund distributors to help find the investors. To find and convince an investor to invest in mutual funds, the mutual fund distributors have to provide them with reasons to invest. 

For that, they need to educate investors on how to achieve their goals and which mutual funds scheme they should invest in. Remember that there are different types of mutual funds and each of them has its unique set of benefits and risk factors. So, investors must be educated on the risk factors as much as they are educated on the benefits. Mutual fund distributors also must provide their investors with different investments to ensure they make the most sound investment choice. 

Eligibility of a mutual fund distributor 

For an individual to act as a mutual fund distributor, he has to pass a set of certain eligibility criteria. Here are some of the eligibility criteria for mutual funds distributors. 

  • The agent serving as or under a mutual fund distributor must be 18 years of age or older. 
  • The agent needs to have a graduation degree or at least a 3-year diploma certificate. 
  • The agent will also need to pass NISM V-A certification to become eligible for registration. 
  • If the agents manage to pass the NISM certification test, they can now register and get the ARN number along with the EUIN number. 
  • The agents will then need to get empanelled from any Asset Management Company and then they will be set to go. 
  • The empanelment from Asset Management Companies can be done both online and offline. 
  • Also, the NISM certification is only valid for a period of 3 years and after that, the agent will need to reappear for the certification exam. 
  • Even before the 3-year period is over, agents can get de-registered if they fail to follow the code of conduct or their distributor is indicted for a serious offence, among other things. 

Responsibilities of a mutual fund distributor 

Here’s a set of duties and responsibilities that every mutual fund distributor must adhere to 

  • They are to present potential investors with all possible mutual fund schemes. 
  • Educate investors on the effectiveness, benefits and risk factors involved in every mutual fund scheme. 
  • Help investors differentiate mutual funds from other investment options such as equity shares, bonds, FDs, and more. 
  • Help investors by guiding them on how to regularly check how their investment performs in the current market. 

Frequently Asked Questions

Both mutual fund distributors and investment advisors will help you make sound investments and help you grow your investment portfolio, but they differ in how they operate. As the name suggests, mutual fund distributors will primarily focus on delivering the best mutual fund schemes to you. Howver, investment advisors will present you with a much wider range of investment portfolios that mutual funds distributors can never provide. 

How great your investments are going to be in the long run will depend a lot on the distributor of your choice. The right distributor will not only help you make great investment choices but also grow and expand your distributor portfolio. Here are some things that you should keep an eye out for when choosing a distributor. 

  • Look for past experience and wins of a distributor in the finance industry. How well a particular distributor will perform in the future depends a lot on how well they did in the past. 
  • When you meet the distributors, ask for a few referrals you could talk to. If they provided sound investment choices to their users and they are happy with it, then the distributor wouldn’t mind providing referrals for them. 
  • Choose a distributor that understands just how much experience you have in investment fields. They also need to understand what you are looking for, and what your financial goals are. 
  • What are the qualifications needed for a mutual fund distributor? 

The qualifications of a mutual fund distributor include their ability to provide sound investment options, their experience and excellence in past records, proper certifications to comply with regulators and more. 

The commission a mutual fund distributor earns is around the range of 0.1 to 2% at the maximum. 

Here are some of the points you need to consider before choosing a distributor. 

  • The distributors’ previous records and excellence. 
  • Look at the number of referrals they can provide. 
  • Their ability to guide and provide sound investment advice. 
  • Don’t rush. Take your time when choosing the right distributor. 
  • Ensure that they can be held accountable for any wrong investment options that they provide. 
  • Lastly, ensure that they qualify and comply with all the regulatory requirements. 

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