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Prudent Corporate

14 Jun 2024

The Ultimate Guide for an AMFI Registered Mutual Fund Distributor

Are you passionate about helping people invest better? If you have the necessary expertise and knowledge, becoming an AMFI Registered Mutual Fund Distributor could be the right path for you.  With mutual fund awareness rising across India, investors now seek trusted professionals who can guide them with suitable schemes. This is where the role of an AMFI registered distributor becomes essential. In this detailed guide, we will talk about who is an AMFI registered mutual fund distributor and how you can become one. Table of Content: 1. Who is a Mutual Fund Distributor 2. Steps to become an AMFI Registered Mutual Fund Distributor 3. What is Mutual Fund Distributor Commission  4. Responsibilities of a Mutual Fund Distributor  Who is a Mutual Fund Distributor A mutual fund distributor, also referred to as a mutual fund agent, serves as an intermediary between AMCs and investors.  A distributor assists clients in selecting mutual funds schemes that fit their investment horizon, risk tolerance, and financial objectives. They also offer guidance, continuous assistance and investment updates.  Their main duties consist of: Guidance: Assisting clients in understanding various mutual funds and how they fit into their overall financial strategy. Distributing Mutual Funds: Handling transaction processing and helping investors allocate their money to mutual funds. Ongoing Help: On-going support involves letting clients know how the funds are performing and also helping them make changes to their investment mixture. How to Become a Mutual Fund Distributor One has to fulfil a few requirements in order to become a mutual fund distributor.  1. Pass the NISM Series V-A Certification To work as an AMFI registered mutual fund distributor, you must pass the (NISM) Series V-A: Mutual Fund Distributors Exam. This certificate ensures your proficiency in financial markets and mutual funds. It is mandatory to renew this certificate every three years. 2. Apply for AMFI Registration After passing the exam, apply for your AMFI Registered MFD Number which is typically known as AMFI Registration Number(ARN). This step grants you the authority to operate as a mutual fund distributor, with the number serving as your official identity in the mutual fund industry. Once an individual passes the NISM Series V-A Exam and obtains their AMFI Registered MFD No, their details are added to AMFI’s central database. This database feeds into the AMFI Distributor Locator, which means that only those holding a valid AMFI Registered MFD No will appear in the search results. 3. Get Empanelled or Partner with Prudent Corporate Once you receive your AMFI Registered MFD No, you have to empanel yourself with the AMCs you wish to represent. Alternatively, you can partner with a national distributor like Prudent Corporate. What is The Mutual Fund Distributor Commission? Mutual Fund Distributor Commission is what distributors earn for guiding their clients. There are two types of commissions: 1. Upfront Commission A distributor receives payment in advance when their clients invest in a mutual fund. This amount is paid just once.  The commission amount is based on the amount invested by clients and the types of mutual funds that they opt for. The distributor receives this commission in exchange for the effort they put in with helping investors with the fund selection process and onboarding them.  Note: AMFI has now Banned Upfront Commission, and this practice is no longer in force.  2. Trail Commission A trail commission is a regular payment. You receive it as long as the investor stays invested in the selected mutual fund schemes.  Responsibilities of a Mutual Fund Distributor  1. Knowledge and Expertise  As an AMFI registered mutual fund distributor, you must have a deep understanding of a variety of different mutual fund schemes. You need to know their features, advantages, risks, and track record. You should also be aware of current market trends as well as the investing process that must be followed. To be the best mutual fund distributor, you must stay updated on these trends. This allows you to offer relevant, timely advice to your clients and build trust and credibility. One can sign up for industry newsletters, attend financial webinars or follow credible investment blogs to stay ahead.  2. Client Education Not every client is familiar with the terminologies of mutual funds or investments.  As a Mutual fund distributor, you are expected to help clients understand these in a simple and easy manner. Clients who receive such education are better equipped to make wise selections and feel more confident about their investments. To stand out and attract more clients, consider creating a YouTube channel where you explain mutual fund concepts in simple, easy-to-understand language.  3. Suggestions Regarding Suitable Investments Your suggestions should include mutual fund schemes that fit an investor's goals, as well as their time horizon, risk tolerance, and financial circumstances.  The recommendations should reflect the investor's profile and preferences. You must also consider the mix of assets, the record, and the fund's performance.  Instead of generic guidance, provide specific recommendations. For instance, if the client does not wish to take risks, then debt funds or conservative hybrid funds can be better than aggressive equity funds. 4. Timely overview The mutual fund distribution business requires a consistent overview of your client's portfolio. To maximise the investor's returns, you should also suggest necessary changes, at regular intervals.  For instance, if a particular fund has been underperforming consistently, you may suggest switching to a better-performing fund to optimise returns. Regular reviews help clients feel confident that their investments are being closely monitored and adjusted when necessary. 5. Client service and support Distributors should give clients quick and accurate support with their investments. Regular communication is essential to establishing lasting connections.  As a distributor, you can send newsletters, updates, or even a brief WhatsApp message to your clients, to keep them updated on the performance of their assets. Conclusion AMFI registered mutual fund distributors act as intermediaries between mutual fund companies and potential investors. Distributors help clients select suitable funds based on their goals and risk tolerance.  To become an AMFI registered mutual fund distributor, you must pass the NISM exam and register with AMFI.  With the right certifications, ethical conduct, and consistent client engagement, you can build a thriving practice. Use your AMFI Registered MFD No responsibly, get listed on the AMFI Distributor Locator, and most importantly, always prioritise your client’s financial well-being as you step forward on this fulfilling journey.