WHAT'S THE ROLE OF MUTUAL FUNDS DISTRIBUTOR

Mutual Fund Distributors

Mutual fund distributors play a very important role in the financial journey of their investors.

They can help the investor in understanding their risk profiles and select the right funds based on the 

1) financial goals, 

2) risk tolerance, and 

3) investment horizon of the investors.

Distributors try to educate investors on risk / return characteristics different types of mutual funds, such as 

1) equity funds, 

2)debt funds, 

3)hybrid funds, 

4)solutions oriented funds, 

5)fund of funds, 

6)passive funds (index funds, ETFs) etc.

Distributors fulfil transaction services like 

buy, 

Redemptions, 

Systematic Investment Plan, 

Systematic Withdrawal Plan, 

Systematic Transfer Plan, 

Switches between Schemes  etc for investors, both for online or offline transactions. 

They also help investors in completing or updating KYC. 

They also provide regular customer services like generating account statements, portfolio reporting and resolving investor queries or issues.

An important responsibility of mutual fund distributors is to review the performance of the investor’s portfolio on a regular basis and take corrective actions (if required) if the portfolio performance is not up to expectations based on market performance.

Distributors may offer insights into market trends and assist in portfolio modifications in the portfolio, including suggesting suitable mutual fund schemes for new investments or replacing funds in the investor’s portfolio based on the risk appetite and investment needs.

Mutual fund distributors hand hold investors during difficult times e.g. bear market, volatile markets etc and help them remain on course in the investment journey. 

They can prevent investors from succumbing to behavioural biases like panic selling in falling markets or irrational exuberance at market peaks, which may harm the investor’s interest in the long term.

Mutual fund distributors usually do not charge any fees from the investors. 

They get commissions from the asset management companies (AMC) or mutual fund houses. 

The commission is part of the Total Expense Ratio (TER) charged by Regular Plans i.e. mutual funds sold through distributors.