Mutual Fund Distributorship – Meaning, Types of Business, Roles, Cost, Commission & more

Mutual Fund Distributors are the heart and soul of the mutual fund industry—this is no exaggeration.

They guide investors to make sensible investments, using their deep knowledge and understanding of the funds.

Mutual Funds are one of the most happening things in the financial world. They are a popular investment vehicle chosen by crores of Investors nationwide, Thanks to their diverse portfolio, accessibility, tax benefits, and more.

However, investors should know mutual funds well and understand their benefits and risks before investing.

In this article, let us discuss the role of a mutual fund distributor in the growing economy and look at the difference between an Agent, Advisor, and Mutual fund distributor.

Learn how to become an MFD, the age criteria, the exam to take, and how to get a commission.

What is Mutual Fund Distributorship? - Mutual Fund Distributor Business

What is a Mutual Fund Distributor Business?

A mutual fund distributor business is where agents sell mutual fund products. They sell the products of the companies or national distributors with whom they tie up.

Mutual funds are unquestionably among the best investment options that generate maximum returns. SEBI regulates the MFD business and AMFI.

Mutual fund sellers recommend top-performing mutual funds to investors and assist them in achieving their financial goals.

The MFDs earn commissions through the AMCs or national distributors. They are free to choose the tie-ups. The more investors they bring on board, the more commission they earn.

Furthermore, each national distributor or AMC has a fixed commission. They give it to the mutual fund agent. They take care of transactions, transfers, redemptions, etc.

Types of Mutual Fund Distributorship

There are three significant ways to operate as an agent. While one is a bit challenging, the other is the easiest way.

Mutual Fund Distributor – Operate Through AMCs

When you individually tie up and register with AMCs, you must follow up with each AMC. Also, you have to negotiate commissions and help clients complete documentation yourself.

You can tie up with around 30 to 40 AMCs at a time. As an agent of AMCs, you can track portfolios and receive higher commissions.

You can also get operation and account opening support from the fund house. However, you can buy separate registration software to handle the clients.

Mutual Fund Sub-Distributor – Tie Up with National Distributor

Another option is to tie up with a national distributor and register as a sub-distributor. The sub-distributor works under the umbrella of the national distributor.

They are there to provide proper guidance. The distributor releases the commission to the sub-distributor.

However, the commission is low compared to the above model. Here are some of the advantages of tying up with a national distributor:

  • As a sub-distributor, you need not take individual empanelment
  • You get training/marketing support
  • You can carry out KYC and investments through a dedicated Mobile app or the distributor’s website.
  • In addition, access your website, which offers complete financial products, such as loan division, business division, insurance, company registration services, etc.
  • There is no locking under this. The sub-distributor can shift AUM anytime.

With a low initial investment, the customer onboarding journey is smooth in this model. However, there is a requirement for an office set up with 2 to 3 members of a team.

Sub Broker Business

Sub-brokers can also become mutual fund sellers. They can sell mutual funds of various finance companies.

Other than trading stocks, they can also sell mutual funds to multiple investors and make a commission.

For example, you can tie up with a stock broker like Angel Broking as a sub-broker and sell its stocks. In addition, you can sell insurance products and mutual funds to the clients.

In this role, the sub-broker has to acquire clients to make a decent commission. They have to offer the best services to the clients to maintain client retention.

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Importance of Mutual Fund Distributors

A mutual fund distributor is an individual distributor who sells mutual funds. They can be a distributor, sub-distributor, or sub-broker.

The mutual fund agent assists investors in buying and selling mutual funds. They follow (SEBI) guidelines. They follow the Association of Mutual Funds in India (AMFI) guidelines.

After that, SEBI regulates mutual funds. It approves and launches new MFs in the market. The distributor is responsible for creating awareness.

They must do so about the benefits. He also makes people aware of the risks of investing in mutual funds.

Like sub-brokers, mutual fund agents receive commission from the revenue generated through clients.

Mutual fund agents have a crucial role in the mutual fund industry. They should deeply understand the industry and its rules and regulations.

Also, they should abide by them. So, it takes a long time to go from clearing the NISM certification exam to kickstarting the business as a mutual fund agent.

Roles and Responsibilities of MFD

A mutual fund advisor must fulfill various roles and responsibilities to achieve success. Firstly, he has to understand the investor’s risk appetite.

Secondly, he has to help clients make proper documentation. Finally, a mutual fund advisor must juggle multiple tasks.

Educating Investors: The agent’s prime duty is to explain mutual funds to investors. He should also be able to communicate their benefits and risks.

Distributors must be ready to answer any questions investors have about the investments they want to make.

Analysing Risk Appetite: Mutual Fund Distributors must analyze investors’ risk appetites. They should be competent to analyze which mutual funds are appropriate for the client’s portfolio.

Also, you have to review this information repeatedly and advise clients accordingly. Moreover, distributors must understand investors’ risk tolerances as mutual funds are subject to market risks.

Thorough Analysis: As a mutual fund distributor, your responsibility is to analyze the investment options. You must analyze the mutual funds that are performing well and suggest them to the investors.

It would be of great help if the investors could collaborate with you on this. For a better analysis, the distributor must keep himself updated. They must know the latest news in the financial world.

Proper Documentation: The mutual fund advisor is also responsible for documentation. The documentation must include the nomination, email ID, contact number, etc.

Difference Between Mutual Fund Distributors and Advisors

A Mutual Fund Distributor is an associate of all the AMCs. The Asset Management Companies provide commissions directly to the distributors.

Meanwhile, the advisor does not take a commission from the company but directly from the investor. You must take a separate exam as you are an advisor and don’t belong to the distribution.

According to SEBI regulations, you will only be advised if you are an advisor. If you are a distributor, you will work on distribution.

In distribution, you can empanel 25 to 30 companies and sell their products. The types of investment you can give to your client depend on what the company sells.

For example, you can provide your client with various investment options, such as tax savers, different funds, etc.

Eligibility Criteria to Become a Mutual Fund Distributor

The eligibility criteria to become a mutual fund distributor include age and educational qualifications.

Age Criteria to Become a Mutual Fund Distributor

Individuals willing to become mutual fund distributors must be at least 18 and take the NISM (V-A) exam.


NISM can be taken by individuals who have passed the 10th or 12th exam. Students with three years of diploma background are also eligible.

The Association of Mutual Funds (AMF) in India is the regulatory body for the mutual funds sector. You have to visit the AMF website to book the exam.

The exam is carried out both online and offline. You can take the exam in NISM centers.

How to Become a Mutual Fund Distributor?

To become a mutual fund distributor, you must first complete the empanelment process with the AMCs. This involves handling documentation, software, and backend support, which can be challenging.

Alternatively, if you want to become a part of a national distributor, your commission gets streamlined.

Furthermore, it gets credited to your account every month. Also, you will get backend support and software support right from them.

If you have to buy annual distribution software outside, it would charge 30k to 40k yearly. However, you can get it for free with the national distributor.

Additionally, there is no distribution charge, annual maintenance charge, support charge, etc. You can become a channel partner with the national distributor and receive all advisory and backend platforms in one place.

If you have the abovementioned qualifications and qualify for the NISM exam, you can register with AMFI and get ARN.

Once you have your ARN, you can get empaneled with mutual fund companies and start your distribution journey.

Step by Step process to Become a Mutual Fund Agent

Here are some steps on how to become a mutual fund distributor. Have a look!

Step 1

Clear the NISM-Series-V-A exam and receive the certification from the exam board.

Step 2

After qualifying for the exam, get the AMFI Registration Number (ARN). ARN number is mandatory for the distributor and sub-distributor.

Step 3

Join hands with AMCs or be a part of national distributors as a sub-distributor. Get your empanelment done.

Step 4

Please educate yourself about the different types of mutual funds and their performance. Then, suggest suitable mutual funds to the investors who come to you.

Step 5

Acquire annual distribution software and provide top-notch services to the customers.

Mutual Fund Distributor Cost or Investment

To become a Mutual Fund Advisor, some cost or investment is required.

  • As we said, you must appear for the NISM Series V-A mutual fund distribution certification examination. You must pay the exam fee of Rs.1,500 to take the exam.
  • You must pay the Association of Mutual Funds in India (AMFI) fee to the authority. For individuals, the fee is Rs.1,770, including GST. Similarly, the partnership firm’s fee is Rs.11,800, including GST. For LLP, it is Rs.23,600, including GST. Lastly, for Pvt. Ltd. Co, the AMFI registration fee is Rs.23,600.
  • If you have set up an office, the expenses would range from zero to Rs.50,000.
  • If you have tied up with a giant mutual fund distributor, you may be asked to pay a one-time distributorship fee. The fee varies from distributor to distributor.

Mutual Fund Distributors Commission & Earnings

A mutual fund agent can earn as low as Rs.10,000 per month and up to Rs.5 Lakhs monthly. On average, with a decent number of clients, an agent can easily earn Rs.50,000 per month.

The earnings depend entirely on the assets he manages. Also, the investments he helps make through clients matter.

The commission depends on the number of clients and investments they make. The more extensive your network, the more you can earn.

For example, for 1 crore revenue generated through clients, the company will give the agent a 1% commission, which is Rs.1 lakh. People with good networks are well-suited for this role.

Again, the commission depends on the mutual fund agent model. Few distribution houses offer commissions based on the number of investments made by the overall clients.

On the other hand, other distribution houses offer commissions based on Asset Under Management (AUM). As the AUM grows, the mutual fund sellers earn more commission.

Let us look at the examples of different distributor models we have:

Example of Mutual Fund Distributor Commission

Let us look at the HDFC mutual fund distributorship model. For example, if 20 clients actively invest in a lump sum, the average AUM per client is Rs.1,10,000.

The total lump sum amount becomes Rs.22,00,000. On the other hand, 725 clients actively invest in SIP. The average AUM per client is Rs.11,000. The total AUM becomes Rs.79,75,000.

The total AUM of both lump sum and SIP becomes Rs.1,01,75,000. The distributor share is 1.25% of AUM, which becomes Rs.1,27,188 monthly.

Example of Mutual Fund Sub-Distributor Commission

Let us look at the Prudent Mutual Fund Sub-distributor model. Let us say you have 20 active clients in Lumpsum Investment.

The average AUM per client is Rs.92,000, and the total AUM is Rs.18,40,000. Similarly, there are 980 active SIP clients.

The average AUM per client is Rs.9,200. The total SIP amount is Rs.90,16,000. The total AUM, combining lump sum and SIP, is Rs.1,08,56,000.

The sub-distributor’s share is 1% of AUM, which is Rs.1,08,560 monthly. Deduct the expenses to run the business, and you will get the profit.

Mutual Fund Distributorship – Conclusion

Mutual Fund Advisors are go-to experts for mutual fund investors aiming to make a mark in the financial market. They educate the investors about the risk appetite.

Also, they analyze the investment options and take care of the documentation. They are required to provide accurate information about mutual funds to their inventors.

Furthermore, investors can attain maximum returns with the assistance and guidance from the mutual fund sellers.

We hope you found this complete guide about mutual fund distributor business helpful.