Becoming a mutual fund distributor in India is an attractive career option for many who want to build a recurring income while helping others invest smartly. However, one of the most important aspects is the mutual fund distributor commission work.

In this article, we will discuss the mutual fund distributor commission structure and the steps on how to become a mutual fund distributor in India.

What is the mutual fund distributor salary ?

Distributors don’t get a fixed salary, but many look up mutual fund distributor salary to see income potential.

They earn commission, known as mutual fund distributor commission based on the total AUM they manage, not a monthly paycheck.

As they gain more clients and promote long-term SIPs, their income increases. Successful mutual fund distributors can earn a stable, recurring income that grows with scale.

What is mutual fund distributor commission?

Mutual fund distributor commission is the income earned by distributors for facilitating mutual fund investments for clients. It is paid by the Asset Management Companies (AMCs). It depends on many factors such as the amount of investment by the client, SIP volume, the type of fund and the location of the investor.

Types of mutual fund distributor commission

01 . Upfront Commission

Upfront commission is a one-time payment made to mutual fund distributors at the time an investor makes a new investment in a mutual fund. This commission is usually calculated as a percentage of the total amount invested and is paid immediately upon successful investment.

Note: The SEBI has now restricted the payment of upfront commission.

02. Trail Commission

Trail commission, also known as trailing commission, is a recurring fee paid to mutual fund distributors for as long as the investor stays invested in the fund. Unlike upfront commissions, trail commissions are paid annually (or periodically) and are calculated as a percentage of the investor’s ongoing Assets Under Management (AUM).

Factors affecting the mutual fund distributor commission

The mutual fund distributor commission is not fixed and can vary widely based on multiple factors. Understanding these can help aspiring distributors estimate their income potential and plan their distribution strategy more effectively.

01. Type of fund

The category of mutual fund plays a significant role in determining the commission structure.

• Equity Funds usually involve long-term investments and higher market volatility, requiring more effort in terms of client servicing and education.
• Debt Funds tend to involve lower risk and shorter investment horizons. The commission structures for these funds are generally more conservative.
• Hybrid or Balanced Funds, which combine elements of equity and debt, offer commission rates that are typically moderate, reflecting the blended nature of the product.

02. Investor location (T-30 and B-30)

The geographic location of the investor also impacts the commission a distributor can earn, due to segmentation guidelines followed by the mutual fund industry.

• T-30 Cities (Top 30 cities by market size) represent urban areas where mutual fund awareness and participation are relatively higher. In these regions, distributors generally receive standard commission structures.
• B-30 Cities (Beyond the top 30 cities) represent semi-urban and rural areas, where mutual fund penetration is still growing. To encourage distribution in these underserved regions, AMCs may offer additional incentives or enhanced commission structures to distributors who bring in investors from B-30 locations.

03. Size of investment

The size or value of the investment also influences the commission earned by a distributor. Since commissions are usually calculated as a percentage of the investment or Assets Under Management (AUM), larger investments naturally have higher earnings.

04. The tenure or duration of investment

How long an investor is in a mutual fund directly impacts the distributor’s commissions. This is especially relevant for trail commissions.

How to become a mutual fund distributor ?

If you’re looking to enter the mutual fund distribution business, follow these steps:

• Clear the NISM Certification

Pass the NISM Series V-A: Mutual Fund Distributors Certification Examination by the National Institute of Securities Markets (NISM). This certification tests your knowledge of mutual fund products, rules, and client management.

• Obtain Your ARN (AMFI Registration Number)

Apply for registration with AMFI (Association of Mutual Funds in India) and obtain your ARN. This number authorises you to distribute mutual funds on behalf of AMCs.

• Empanelment or partner

You can choose to work directly with individual AMCs by getting empanelled with them. Alternatively, you can partner with a National Distributor like Prudent Corporate that gives you access to multiple AMCs and tech tools for client servicing.

Conclusion

Becoming a mutual fund distributor is a great way to earn and grow. It also lets you make a difference in people’s financial lives.

Knowing the mutual fund distributor commission structure helps you plan your business and build a consistent income. If you love finance, enjoy helping people, and want to create wealth for yourself and others, this profession is worth considering.