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How to start mutual fund distribution business | The Guide

Looking for how to start mutual fund distribution business?

Well, it is an opportunity for you to make huge profits and become a millionaire if you do it right.

Steps to start a Mutual Fund Distribution Business

Step 1- Become a Mutual Fund Advisor

The most important thing to become a mutual fund distributor is to pass the NISM (National Institute of Security Market) exam. So, register for the exam of mutual fund distributor and ace to start your own business.

Registration Fees – Rs.1500/-

If you pass the test, the Mutual Fund Advisor certificate will be available after 30 days of the examination.

Step 2- Registrations

Further, for how to start mutual fund distribution business, you have to do some mandatory registration. Therefore, I have listed it down for you:

Step 3- Investment

Starting a mutual fund distribution business will require a good amount of investment. You need a minimum investment of Rs. 50 lacs for starting a mutual fund distributor business and backup funds for unfortunate events.

Step 4- Business Planning and Setup

Further, after registration, planning a mutual fund distribution business requires utmost knowledge in the field, and if you do not have any, it is better not to start one.

To plan a mutual fund business, you have to research, analyze, strategise and invest.

Set up your business in the following manner:

  • Create a website

Creating a website for Mutual Fund Business would be the best option. It is a very effective way to promote business and with a customized website, you can attract a lot of customers.

  • Determine the fee

Determine the fee percentage you will charge investors as a commission and be ready with the best techniques for managing funds.

Keep in mind, the market won’t always favour your business. Therefore, you need a backup plan also.

It can be an expensive venture. But if you can attract a considerable number of investors, it will not be a problem in the long run.

  • Decision making

As the manager, you will decide which bonds or stocks to buy/sell. You are the key to making money on behalf of the shareholders.

When a mutual fund is good, you don’t want the price to go up. When it is going down, you can put more money into the business. That will allow you to make more money in the long term.

Start working on your plan and, you can address the most essential aspects of the business.

  • Set up Accounting software

Make sure you have accounting software to properly monitor the finance. These accounting figures can make or break a business, so you should take them seriously.

Step 5- Hiring

You cannot operate a business single-handedly. Therefore, you will need to hire a team of professional experts in Mutual funds as consultants.

Further, you will need:

  • Accountant
  • Sales Team
  • Developer and Website Manager
  • GST Experts
  • Mutual Fund Consultants
  • Security Guard

Mutual Fund Investment Advisor’s Role

  • Recognizing the requirements of investors: Mutual fund advisors must strive to understand their clients’ objectives as well as the timelines for achieving those objectives. Their recommendations will be based on the client’s goals, whether they are saving for retirement, building wealth, planning for higher education, or anything else.
  • Educating their customer: A mutual funds advisor’s next responsibility is to educate their client about the current financial products available, particularly those that are most suited to their goals. Advisors may be required to dig deep and educate investors on investment constraints in some cases.
  • Identifying an investor’s risk appetite: Some investors are aware of their risk tolerance and may express it to their advisor upfront. Others may not be informed, and as a result, their mutual fund advisor should be consulted. To build a long-term financial portfolio, one must be aware of how much risk one can take on in their assets. As a result, mutual fund advisors play a critical role in assisting clients in determining their risk tolerance.
  • Analyzing Investment Possibilities: One of the MF advisor’s responsibilities is to assess the many investment options and propose curated options to clients. MF advisors are educated to evaluate mutual fund performance data and compare schemes to find the ones that are most suited to their client’s objectives.
  • Portfolio Diversification: For the majority of their customers, mutual fund investment advisors focus on portfolio diversification as a goal. Having a diversified portfolio eliminates the risk of excessive volatility and risk in one’s investments. By optimising one’s portfolio, the advisor hopes to reduce risk.
  • Maintaining financial records: Another important task for a mutual fund investment advisor is to keep track of their clients’ financial records. Transaction information, income information, and other information can be found in these records.

Mutual Fund Registration Eligibility

  • An applicant must meet the following SEBI (Mutual Fund) Regulation, 1996 eligibility criteria to receive a certificate of registration:
  • In his previous experiences and commercial transactions, the sponsor should have a track record of fairness and integrity.
  • It must have at least 5 years of experience running a business and providing financial services. And throughout those five years, the net worth will be positive.
  • The sponsor must contribute at least 40% of the Asset Management Company’s net value.
  • The sponsor should be free of fraud and has never been convicted of a crime involving moral turpitude.
  • A mutual fund trustee must be appointed by the sponsor.
  • Appointment of an Asset Management Company to administer the Mutual Fund’s funds and activities. Such an asset management firm must have a net worth of INR 5 crore.
  • The memorandum must include the objects that authorize the sponsoring business to conduct mutual fund activities.

Mutual Fund types:

  • Equity Mutual Fund: 

According to equity mutual funds, most of the money is invested in stocks. Because of this, the risk is also high. In this scheme, two options are given to the investors, the dividend scheme or capital growth, the option can also be changed, later if someone wants.

In addition, an equity fund is an ethical choice for everlasting investment.

Moreover, the ten-year average return in these funds is 12 to 15 per cent.

  • Debt/Income Schemes:

Debt funds are a great, option for anyone looking for a stable and stable income without taking risks. Most of the money in this system is spent on bonds, debt, and government bonds. The market variable does not affect them, as they are all like debt. All of these options provide investors with a stable income. Income is lower than equity, but the risk is also lower. The average ten-year return of these funds can be 8-10 per cent.

  • Hybrid Scheme: 

As the name suggests, Hybrid Fund is a combination of equity and debt investments. These funds are designed to meet the investment objective of the scheme. Each hybrid fund has a different combination of equity and debt targeted at different types of investors.

With this you can also go for company registration in Mumbai, Chennai, Bangalore, Kolkata etc. for more bigger investors.

A hybrid mutual fund tries to build a balanced portfolio to provide regular income with capital growth over the long term to its investors.

The fund manager builds a portfolio as per the investment objective of the scheme. These funds allocate funds in equity and debt instruments in different proportions. In addition, the fund manager also buys or sells assets if the market moves favorably.

  • Solution-Oriented Scheme:

These schemes are lining with specific goals or solutions. These may be goals such as retirement savings and education for children.

You should invest in these programs for at least five years.

Important Points to note for starting a Mutual Fund Distribution Business

  • Marketing of mutual funds is necessary.
  • Finding potential investors can be challenging. You will need to use the right strategies as this is the only way to grow current assets, and you may also incur fees.
  • Avoid marketing companies as they can fetch your big bucks.
  • It is possible to do this task yourself, as you have the knowledge and skills.
  • Another important consideration is the management of the fund. Also, keep an eye on all investments as much as possible.
  • With your own business, you will act as the manager and be responsible for all your decisions.

Conclusion

So, this is how to start mutual fund distribution business.

In other words, If you want to earn maximum profit, you have to start your own mutual fund business. That will allow you to make more profits from those who invest in bonds, stocks, and some financial instruments. To create the mutual fund, you should consult with your securities attorney for registration details.

Try to hire an attorney with good experience in securities law so that you can set up the company with ease. You can use the internet to find professionals who can assist you in various aspects of the business.

 

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