Do you want to start a mutual fund distribution agency in India? This comprehensive guide is for you!
In this article, you’ll learn the step-by-step process to start a mutual fund distribution agency in India. We’ll also explore different aspects of a mutual fund distributor, such as roles and responsibilities and commission earned.
What is a Mutual Fund Distributor?
A Mutual Fund Distributor is an authorised individual or entity distributing mutual fund schemes to investors. They facilitate the buying and selling of mutual fund units between Asset Management Companies (AMCs) and investors.
The distributor helps investors select suitable mutual fund schemes based on risk tolerance, financial objectives, and investment preferences. They receive commissions or fees for providing valuable distribution services to their clients.
Steps To Start A Mutual Fund Distribution Agency in India
- Register your Agency with ROC – To establish a Mutual Fund Distribution Agency, the first step is to register your agency with the Registrar of Company (ROC). It will lay a legal foundation for your agency.
- Recieve a Permanent Account Number (PAN) – Obtain a PAN for your company to ensure compliance with financial regulations. It enables smooth financial transactions.
- Set Up a Corporate Bank Account – The next step is to open a corporate bank account for your agency. It will facilitate efficient management of finances, commissions, and payments.
- Appoint Director and Employees – Appoint at least two directors qualified to be mutual fund agents. They’ll be responsible for the smooth functioning of your agency in the mutual fund industry.
Also, you’ll need to appoint a reliable mutual fund agent as your employee to handle all things related to mutual funds in your agency.
- NISM Certification – Make sure that the directors and the employee you appoint pass the NISM-Series V-A: Mutual Fund Distributors Certification examination. It ensures reliability by showcasing that the agency has the expertise to help clients looking to invest in mutual funds.
- KYD (Know Your Distributor) Process – To ensure transparency and credibility, make sure both your agency and the designated employees complete the Know Your Distributor (KYD) verification process.
The Association of Mutual Funds in India (AMFI) mandate this process to safeguard the interests of investors.
- Obtain AMFI Registration Number (ARN) – Once the KYD verification process is completed, apply for an ARN for your agency. It officially authorises your agency to operate as a mutual fund distributor.
Once all these steps are completed, you can start your mutual fund distribution agency journey by empanelling mutual funds, marketing your services, and providing valuable financial advice to clients.
Roles and Responsibilities
- Establish long-term partnerships with reliable Asset Management Companies (AMCs) to provide your client with a range of mutual fund options and enhance your agency’s credibility.
- Identify and recommend potential mutual fund schemes to clients that align with their financial goals and risk tolerance.
- Provide proper guidance and valuable investment advice to clients on portfolio management and mutual fund products.
- Facilitate buying and selling of mutual fund units on behalf of clients.
- Maintain client relationships by ensuring regular communication, smooth transactions, portfolio reviews, and updates on market trends.
Mutual Fund Distributor Commission
Mutual Fund Distributor Commission are based on two models-
- Upfront or Front-end Load Commission –
Upfront commissions are associated with specific transactions. It is earned by the distributor when investors buy and sell mutual fund units through them. It is important to note that this type of commission is no longer applicable.
- Trail or Back-end Commission –
Trail commissions are associated with distributors’ total Assets Under Management (AUM). Distributors will earn this commission as long as investors remain invested in mutual funds through them. SEBI has mandated this type of commission as the sole mode of payment to distributors.
Conclusion
Establishing a mutual fund distribution agency provides distributors with a range of opportunities to engage with potential investors and assist them in achieving their financial goals.
If you are interested in starting your career as a mutual fund distributor, connecting with Choice can be beneficial for you. Choice is a full-service broker that has been serving clients for more than 30 years. Their professional team has the right expertise to provide comprehensive financial services to help individuals achieve their financial goals.
Why wait? Get in touch with Choice today and start your journey as a mutual fund distributor.
Disclaimer: Please note that while this article aims to provide accurate and up-to-date information, it should not be considered official financial advice. It is advisable to always consult a financial advisor before making investment decisions.
