MFD Karein Shuru: Start your Mutual Fund Distributors Business Today
- AssetPlus
- Feb 10, 2023
- 30 min read
Updated: Jun 13, 2024
Are you a finance enthusiast with a keen interest in mutual fund investments?
Become a Mutual Fund Distributor today & forge a successful career in the mutual funds industry!
The Mutual Funds industry has grown exponentially in the last two decades in terms of schemes introduced, assets managed, and the number of investors pooling their assets. Despite this, not all investors enter the investment field with sound knowledge of the market nor the ability to evaluate and forecast it. Besides, there is a huge gap between the number of investors and the effectiveness of AMCs in managing investments.
This is where Mutual Fund Distributors step in.
Mutual Fund Distributors encourage potential investors to subscribe to different mutual fund schemes launched by Asset Management Companies. Thus, the role of Mutual Fund Distributors is that of a financial intermediary providing investment advice to investors and acting as agents to Asset Management Companies.
To bridge the gap between investors and AMCs through MFDs, the Association of Mutual Funds of India (AMFI) launched a campaign called "MFD Business Karein Shuru'' with effect from 12th July 2022. The primary objective of this campaign is to encourage individuals to consider the career of a mutual fund distributor for achieving financial success while also boosting the development of the Indian mutual funds industry.
This article is a detailed guide to help you learn about AMFI as a regulatory body, its objectives and role in the mutual funds industry, its MFD Karein Shuru Campaign, AMFI Registration Number, and more. Let us begin.
WHAT IS THE ASSOCIATION OF MUTUAL FUNDS OF INDIA (AMFI)?
The Association of Mutual Funds in India, also known as AMFI, is a non-profit organization set up in 1995 by the Securities and Exchange Board of India (SEBI) to oversee the mutual funds industry in India. It is a regulatory body that aims to boost the development of India’s mutual funds sector. AMFI strives to ensure that stakeholders maintain the highest ethical and professional standards. Thus, the objective of AMFI is to protect the interests of both mutual fund companies and investors alongside strengthening the mutual funds market.
AMFI includes the following members:
Asset Management Companies that roll out mutual fund schemes for investment.
Mutual Fund Distributors (MFD) that act as intermediaries to help investors invest in the right mutual fund schemes.
Let us now learn how AMFI regulates the Indian Mutual Funds Industry and its objectives.
OBJECTIVES & ROLE OF AMFI:
The primary objective of AMFI is to regulate the Indian mutual funds industry by enhancing investment transparency and promoting investor education. AMFI strives to resolve disputes arising in the mutual fund's investment space and establish investor trust. In addition to these, AMFI streamlines the following aspects of the mutual fund industry:
Establish and maintain high standards of professionalism and ethics throughout the mutual fund industry.
Recommend best business practices and code of conduct to be followed by members engaged in introducing mutual fund schemes and management of assets.
Involvement with (SEBI) and other industry regulators and represent on their behalf.
Conduct nationwide investor awareness programs to help investors understand mutual funds and protect their interests.
Circulate information on the Mutual Fund Industry and undertake studies and research directly and in association with other bodies.
Regulate the conduct of distributors, including disciplinary actions for any violations.
Now that we know about the objectives and role of AMFI in the Indian mutual funds' industry, let us dive into the process of registering and becoming a member of AMFI.
HOW TO REGISTER & BECOME AN AMFI MEMBER?
AMFI has authorized Computer Age Management Services Pvt. Ltd. (CAMS) to act on its behalf for processing the registration of members/intermediaries. Eligible individuals /organizations can register in the following manner:
Register online through the CAMS website or visit the nearest branch of CAMS, obtain the application and Know your Distributor (KYD) form, fill in the required details, and submit them along with payment of registration fees.
Submit all the required documents as listed below in addition to applicable registration fees, which is Rs.1,500+GST (Kindly note that this fee amount is subject to change. Check the official AMFI website to know the latest fee amount):
Copy of NISM VA: Mutual Fund Distributors Certification Examination
Copy of Aadhaar Card
Copy of Pan Card
Proof of Bank Account
Two Passport-sized photos
Once the registration process is complete, AMFI will share the Letter of Registration with the registered email address. AMFI will allot a unique ARN to the individual/organization on successful registration.
The primary requirement for becoming an AMFI member is the NISM VA: Mutual Fund Distributors Certification. Let us know what the NISM is and the importance of this certification.
Alternatively, you can message us on WhatsApp and our team will help you to apply for NISM VA certification for free. Click here to Whatsapp.
NATIONAL INSTITUTE OF SECURITIES MARKET (NISM)
The National Institute of Securities Markets (NISM) is a public trust established in 2006 by SEBI to facilitate various capacity-building activities at multiple levels. NISM aims to enhance the quality standards in securities markets. The institute functions through six schools of excellence that work to create and maintain professionalized conduct of the securities markets. The School of Certification of Intermediaries (SCI) conducts all the certification examinations.
The Securities and Exchange Board of India (SEBI) has made it mandatory that any entity or person engaged in the marketing and selling of mutual fund products pass the NISM Certification and obtain ARN/Employee Unique Identification Number (EUIN) registration number.
NISM SERIES V CERTIFICATION
The purpose of the NISM Series V certification is to enable people to become successful mutual fund distributors by obtaining basic and advanced knowledge of mutual funds, enhancing the quantity and quality of Mutual fund sales, and ensuring better distribution and support services.
The series has two certificate levels:
NISM V-A Certification or (Level-1).
NISM V-C Certification or (Level-2).
Level 1 or Series V-A exam is for individuals who wish to become a Mutual Fund Distributor by registering with the Association of Mutual Funds in India (AMFI). Level 2 or Series V-C exam is for existing Mutual Fund Distributors to enhance their knowledge by understanding advanced mutual fund products, fund valuation, fund performance measurements, investor service, and related regulations.
“Read about NISM Series V-A Certification here.”
We now know that the NISM V-A Certification is critical to becoming a member and registering as a Mutual Fund Distributor with AMFI. On obtaining the certification, an individual can register with AMFI by generating their AMFI Registration Number (ARN). Let us learn about this ARN and its significance.
To know more, click here.
AMFI REGISTRATION NUMBER (ARN):
The AMFI Registration Number is a unique code issued by AMFI to mutual fund distributors or agents to authorize them to sell or market units of mutual fund schemes to investors. The ARN is a mandatory identification without which no organization or individual can legally distribute or sell units of MF schemes.
The ARN code is a measure to ensure transparency in the market, regulate mutual fund distributors, and safeguard investors. To obtain an ARN Number, an individual must register as an intermediary with AMFI. To facilitate the registration, the individual must receive a NISM certification by clearing an exam conducted by NISM. We have already explained the NISM Certification in the previous paragraph.
The ARN Significance:
The ARN number is critical for agents and distributors who market or sell units of mutual fund schemes to investors. Let us now learn about the significance of the AMFI Registration Number:
An ARN code acts as proof of identity and legitimacy of a mutual fund distributor, agent, or advisor.
In today’s era of rising scams and fraud cases, the ARN code assures investors that the mutual fund distributor is genuine and follows AMFI’s code of conduct and ethics.
The registration number also helps investors track assets the mediator enlisted.
An ARN code also proves beneficial if the investor changes the mutual fund distributor.
Moreover, the AMFI ARN is also helpful in calculating the brokerage or commission earned by the advisor, agent, distributor, etc.
Steps to Start Operating as a Mutual Fund Distributor After Obtaining Your ARN Number
Once you have secured your ARN (AMFI Registration Number), you're well on your way to functioning as a mutual fund distributor. Here are the steps you need to follow:
Register with AMCs and Distributors:
Sign up with Asset Management Companies (AMCs).
Connect with major mutual fund distributors.
This registration allows you to promote their mutual fund schemes to potential investors.
Get Certified:
Ensure you have all necessary certifications and fulfill regulatory requirements.
Compliance with the SEBI (Securities and Exchange Board of India) guidelines is crucial.
Build Clientele:
Start advising clients on various mutual fund investments.
Utilize your knowledge to guide them towards suitable fund options based on their financial goals.
Earn Commissions:
As you advise clients and they invest through you, you'll begin to earn commissions on these mutual fund transactions.
By following these steps, you'll be equipped to operate efficiently and effectively as a mutual fund distributor.
What is the MFD Karein Shuru Campaign?
The MFD Karein Shuru Campaign launched by AMFI targets diverse groups, including fresh graduates, small business owners, retired individuals, finance professionals, women trying to enter the workforce, and even those considering a career shift to become mutual fund distributors. AMFI promotes its campaign through various mediums, including television commercials, print & digital media advertising, and through its existing members.
With the Indian mutual funds industry accelerating towards steady growth in the coming years, this is the ideal time to consider choosing the career path of becoming a mutual fund distributor. This promising career benefits in 3 ways: expand the Indian mutual funds industry, encourage people to start investing in mutual funds, and enable mutual fund distributors to become financial advisors and help investors achieve their financial goals. It also helps mutual fund distributors grow professionally and build successful careers for themselves.
Frequently Asked Questions About MFD Business Karein Shuru:
How does the commission structure work for mutual fund distributors over multiple years?
Understanding Mutual Fund Distributor Commissions Over Multiple Years
Mutual fund distributors have the opportunity to earn substantial commissions through various forms of compensation from Asset Management Companies (AMCs). Here’s a breakdown of how the commission structure works over multiple years:
Upfront and Trailing Commissions
Upfront Commission:
This is paid at the time of the initial investment.
Trailing Commission:
This is earned over the duration that the client's investment remains under the distributor’s management.
Example Breakdown
Consider a client who invests INR 1,00,000 annually for 5 years. Here's an illustration of the potential earnings for a distributor:
Year Annual Investment Total Assets Under Management (AUM) @ 12% Growth Trailing Commission (1st Year) Trailing Commission (Subsequent Years) Total Annual Commission 1 ₹1,00,000 N/A ₹500 N/A ₹500 2 ₹1,00,000 ₹1,12,000 ₹500 ₹560 ₹1,060 3 ₹1,00,000 ₹2,37,440 ₹500 ₹1,187 ₹1,687 4 ₹1,00,000 ₹3,77,932 ₹500 ₹1,889 ₹2,389 5 ₹1,00,000 ₹5,35,284 ₹500 ₹2,676 ₹3,176 Here’s what each column represents:
Year: The number of years the client has been investing.
Annual Investment: The fixed amount invested by the client each year.
Total Assets Under Management: The cumulative value of the investment assuming a 12% annual growth rate.
Trailing Commission (1st Year): Commission earned in the first year.
Trailing Commission (Subsequent Years): Additional commission earned from previous years' investments.
Total Annual Commission: Sum of commissions earned from new and previous investments.
Long-Term Earning Potential
The commission significantly grows if the client continues investing over a more extended period. For instance, in the 15th year, a mutual fund distributor's total commission can surpass INR 18,639, highlighting the lucrative potential of sustained client relationships.
By understanding this commission structure, mutual fund distributors can better appreciate the financial rewards of maintaining long-term client investments.
What is the structure of commissions for mutual fund distributors?
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What exactly is MFD and what does it do?
MFD stands for "Mutual Fund Distributor." A mutual fund distributor is a person or company that works as a go-between for mutual fund firms and investors. They help investors navigate the investment process by providing information on various mutual fund schemes and enabling the purchase and sale of mutual fund units.
Anyone above the age of 18 can become a mutual fund distributor in India and start their own MF distribution business.
How do Mutual Fund Distributors earn money?
Is it mandatory to pass the NISM Series VA Exam to start an MFD business?
What are the earning potentials for mutual fund distributors based on client investments?
What is the role of an MFD distributor?
What is the full form of MFD in mutual funds?
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