The Role of Mutual Fund Distributors in Investment Management

  • May 18, 2023
  • Dushyant Sharma
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India is a country where conventional investment avenues like FDs, LIC and others are still popular. Ask anyone and you would find that LIC is the first choice of most people. The reason is the trust that the insurance company built in the eyes of investors. However, things have started changing since the launch of mutual funds. For years, stock investment has always the most favorite investment channel for many but due to lack of market knowledge, they remain hesitant to the same. But mutual funds brought a fabulous opportunity to investor to leverage the compounding power of stock investments and let them see their money grow like never before.

According to various report, the overall AUM of the mutual funds sector has witnessed unprecedented growth by jumping from Rs. 1.04 lakh crore to Rs. 40.08 lakh crore till January 2023. It refers to an amazing 38% growth. The major credit to this growth goes to a number of things rising awareness and surging income levels of investors. However, in between all this, one thing that can’t be overlooked is the role of mutual fund distributors who burn their sweat and form a strong base for this industry.

The overall volume of ARN holders that are also known as mutual fund distributors in India, registered with the industry body 'Association of Mutual Funds in India' (AMFI) stands at nearly 1.32 lakh with the number of investors is expected to be somewhere around 3.7 crores with 14.28 crore folios (according to AMFI, January 2023). The folio volume of investors has been growing rapidly in recent times. However, at the same time, it is also true that mutual fund growth in India is extremely low in comparison to the developed nations. It has started witnessing growth in just the last few years due to increased awareness among investors and mutual fund creditors played a substantial role in getting this done.


Who is a mutual fund distributor?

A mutual fund distributor usually refers to a person or a business unit that is intended to help investors in the buying and selling of mutual funds in India. In other words, these distributors can be termed as middleman who do a lot more than just selling mutual funds to people.  They need to obtain mutual fund distributors license in India to operate.

As they operate at the cross-roads of the stock market and the mutual fund industry, they are governed by both the Securities and Exchange Board of India (SEBI) and the Association of Mutual Funds in India (AMFI). This is done under mutual fund distributor registration.

Their first and foremost job is to raise awareness among people about mutual funds, their benefits, types of funds, and more. Overall, all these things work in tandem which ultimately leads to the sale of mutual funds.


The Role of Mutual Fund Distributors in The Investment Landscape

Apart from just increase the registration of mutual fund investors, mutual fund distributors play a crucial role in strengthening the investment sector in several ways. Let’s get to know them below.

Raising Awareness

The most prominent job of mutual fund distributors is to increase the awareness of mutual fund products among investors by presenting facts to them.

Since not everyone is well aware of the stock markets and mutual funds, they need to be provided fresh, relevant information which instill some confidence in them towards mutual funds. Different mutual fund elements include what are mutual funds, types of mutual funds, benefits of mutual funds investment, and others.

Mutual fund distributors can also be held responsible for clearing any doubt investors may have. The more clarity is in their mind, the more they are likely to invest in mutual funds.

Evaluation of Investment Choices

Among various complex things, one is to help mutual fund investors choose the right fund for their portfolio. This is where a quick and smart analysis of all the available investment options needs to be done. Mutual fund distributors help investors with this by presenting and comparing all the investment options.

They need to keep themselves updated about the latest market data and different types of mutual funds available to match the specific financial objectives of investors.

Assessing Risk Tolerance

Mutual fund distributors also assist investors is examining the level of risk tolerance. With regard to mutual funds investment, comprehending and measuring risk tolerance is crucial as this element ascertain what type of mutual fund is suitable for an investor’s portfolio.

Helping with documentation

Mutual fund distributors also help investors with completing all the formalities and documentation needed for mutual funds investment. A mutual fund distributor helps an investor by managing  his or her documentation-related needs.

For this, mutual fund distributors are supposed to work in a highly confidential way they handle with their clients' important documents.

Preparing Investment Strategies

Investment planning is an immediate thing to do right after investment analysis. In other words, it refers to developing an investing plan. Mutual fund distributors help investors by helping them create mutual fund investment plans that match their objectives and needs.

Distributors may also help investors in expanding their assets across various mutual fund schemes.


The Conclusion

From the above-given points, you can expect to be in a better position about the role of mutual fund distributors and their role in investment landscape. If you want to become a mutual fund distributor or want help with mutual fund distributor registration, contact a team of experts at today.

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Dushyant Sharma
Author: Dushyant Sharma

Hey there, I'm Dushyant Sharma. With the extensive knowledge I've gained in past 8 years, I have been creating content on various subjects such as banking, insurance, telecom, and all the important registration and licensing processes for various companies. I'm here to help everyone with my expertise in these areas through my articles.

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