Who are Mutual Fund Distributors?
Mutual Fund Distributors are no one but Mutual Fund Agents or Brokers. Now, we all know what agents do, they pursue people to buy the products of a company with which they are associated to. They give you information regarding the product they are offering, they help you to make the right choice, etc. in return for a certain commission earned by that company.
Similarly, Mutual Fund Agents help you in buying and selling the most suitable scheme for you. They also provide you the information about the schemes available, regularly track the schemes and their performance to help you in making the right choice, they advise you regarding different investment options and many other services. They earn a commission in return for persuading the investors to purchase a scheme of a specific Mutual Fund House.
Role and Importance of Mutual Fund Distributors
Mutual Fund Distributors have many roles to play as they are the once accountable for the advice they provide to the investors like us. Let us look at some of the duties of Mutual Fund Distributors.
- Mutual Fund Distributor helps investors by providing information about various investment options available according to their investment objective.
- Many investors also face difficulty in analyzing their risk profile and selecting the funds that will suit them. So, Mutual Fund Distributors helps you in evaluating your risk profile i.e. whether you are an aggressive investor or conservative or fall in any other risk profile, and also in selecting the appropriate Fund.
- They will be there for your help when you want like if you want to redeem your units you just have to contact the agent and he will help you with any transaction-related issue.
- They also help the investors to diversify their portfolio as the market or the objective of the investor changes, giving you exposure to different investment options.
- Mutual Fund Agents also advise you about the best scheme available after analyzing your objective, period for which you want to invest, your risk profile, and other factors.
Pre-requisites to become a Mutual Fund Distributor
Yes, anyone can apply or become a Mutual Fund Distributor. Although there are certain eligibility criteria that you have to fulfill after which you can become a Mutual Fund agent. The steps on how to become a Mutual Fund Distributor is given below:
- The first criteria are that you should be 19 years and above. And you should have cleared High-Secondary school along with 3 years of the diploma.
- Then you will have to clear the NISM Series V-A: Mutual Fund Distributor certification, which has been mandatory by the Securities and Exchanges Board of India (SEBI).
- After you pass the NISM Series V-A: Mutual Fund Distributor certification, NISM will issue an ARN number along with the Employee Unique Identification Number (EUIN), after which you will become eligible to sell Mutual Fund products. Note: NISM certification is valid for a period of 3 years from the date of the exam.
- Now, when you get your ARN number from the Associaton of Mutual Funds in India (AMFI), you can get associated with the Asset Management Company (AMC) of the Mutual Fund House whose products/schemes you want to sell. You can check any further details about the process on the AMC website of the particular Mutual Fund house.
Well, if you are a Senior citizen and you wish to become a Mutual Fund Distributor, that is totally possible. For becoming a Mutual Fund Distributor you have to attend Continuing Professional Education (CPE) training module. After completing CPE, you are eligible to complete the rest of the process and apply for the ARN number as described above.
How do you choose the right Fund Distributor?
It is very important to choose the right Mutual Fund Distributor as a wrong selection can lead to a bad investment and thus resulting in less or no returns. Well, you cannot just go and apply through an agent right? For that, you need to consider a few points before applying or selecting any distributor.
- As we know, when investing in Mutual Funds it is important to check the experience and performance of the Fund Manager of the particular Fund. Similarly, when investing through agents/brokers it is important to look for ones who have been in the Distributor market for a couple of years and whose performance can be trusted.
- Then you can go for a referral check like you can ask the Mutual Fund distributor to provide you with the number of those investors with whom they have worked and you can take out the performance and other information by contacting those investors.
- The Mutual Fund Distributor should have good interpersonal skills like he should be able to clearly explain to you and make you understand the points that he is talking about. If he cannot do so then there might be misunderstandings.
- The main thing is accountability. The Mutual Fund Distributor you select should be accountable and answerable for the suggestions given by them. As there might be many who might promise you many things but when the time comes they would back off which might lead you to trouble.
- Then the Distributor you select should comply with the SEBI and AMFI regulations.
Is it possible to change the Distributors?
We all know that in today’s generation everything has become customer-centric. Because if the clients are not happy then none of the business would be successful. Now, there might be one or many reasons for which you might want to change the Distributor with whom you are currently working. So this question might arise in your mind that whether you can or not? So, yes you can easily change the current Distributor by just filling a form that you can get from AMC’s website.
There are two plans through which you can invest namely a Regular Plan (investing through agents) and Direct Plan (investing without an agent). You as an investor can also exit from the regular plan and enter into a direct plan. Now when you do so the thing you should look at is the exit load in the scheme you have invested in, if you change the plan within that period then you will have to pay the exit load (charge). But if you change it after that period then you won’t have to pay any charges. Also, different funds have different exit load charges and periods like in equity funds the exit load is charged if you exit before 1 year, similarly debt funds would have a different charge and period.
For example, if you are invested in an equity fund regular plan form1.5 years and you want to change into the direct plan. Then you won’t have to pay any exit load as you have been invested for more than the period of 1 year.
FAQ’s
Mutual Fund distributors are the agents who help the investors in buying and selling the Mutual fund schemes. They advise the investors regarding the Mutual Fund schemes that suit their investment objective, the period of investing, and their risk profile.
They earn income in the form of commission by attracting investors to purchase the Mutual Fund scheme through them.
No, it is not necessary that you have to invest in Mutual Funds through agents. You can also invest in Mutual Fund schemes through a direct plan which does not include any middlemen like distributors. When you invest in a regular plan then Distributors are involved.
