A mutual fund distributor (MFD) is a licensed professional or firm that helps investors buy and sell mutual fund units. They act as a bridge between mutual fund companies (Asset Management Companies - AMCs) and investors, offering guidance based on the investor’s financial goals, risk appetite, and investment horizon.
Unlike financial advisors who may charge a fee for advice, mutual fund distributors earn a commission from the AMCs for selling their funds.
Role of a Mutual Fund Distributor
Understanding Investor Needs: Assess the client’s financial goals and suggest suitable mutual fund schemes.
Portfolio Construction: Recommend a diversified portfolio across equity, debt, hybrid, or other funds.
Onboarding and KYC: Help investors with account opening, KYC compliance, and documentation.
Transaction Assistance: Guide through the buying, selling, and switching of mutual funds.
After-Sale Service: Monitor investment performance and suggest periodic reviews or rebalancing.
How Mutual Fund Distributors Earn
| Type of Earning | Description |
|---|---|
| Upfront Commission | Paid at the time of selling a fund (largely restricted nowadays). |
| Trail Commission | Ongoing commission based on the investment amount held by the investor. |
Becoming a Mutual Fund Distributor
To become an MFD in India, one needs to:
Clear the NISM-Series-V-A: Mutual Fund Distributors Certification Examination.
Obtain an ARN (AMFI Registration Number) from AMFI (Association of Mutual Funds in India).
Conclusion
A Mutual Fund Distributor plays a vital role in simplifying investments for individuals, especially first-time investors. Choosing a trusted distributor ensures that you make informed, goal-based, and tax-efficient investment decisions.