How to Choose a Mutual Fund Distributor

Every mutual fund distributor in India must be registered with AMFI and holds an ARN number. Ours is ARN-145870.

You can look up any ARN on the AMFI website and see the name, the registration and its validity. It takes a minute. Our post on checking whether somebody is registered shows how.

If somebody cannot give you an ARN, or the name does not match, stop there. This is the single most useful check you can make, and almost nobody makes it.

A distributor is paid a commission by the fund house, out of the scheme expense ratio. You do not pay a separate fee, and the money does not come out of your investment as a deduction.

That is why a regular plan has a slightly higher expense ratio than a direct plan, which our page on direct versus regular plans explains honestly. If you do not want a distributor, direct plans exist and cost less.

What matters is that you know this. A distributor who will not explain how they are paid is telling you something.

Two different licences, and the difference is not cosmetic.

A distributor holds an ARN, is paid by the fund house, and may explain products and execute transactions. A distributor may not charge you a fee for advice.

A registered investment adviser is registered with SEBI, charges you a fee directly, and gives personalised advice under that licence.

Both are legitimate. The problem is somebody acting as one while being the other. We are distributors, we say so on every page, and where a question needs an adviser or a tax professional we say that too.

• What is your ARN, and how long have you been doing this?
• How are you paid, and by whom?
• What will you do when markets fall? Listen for whether they mention calling you.
• Who handles my paperwork if you are not available?
• What will you not help with? An honest answer here is a good sign.
• Can I see how my folios are recorded in my own name?

A good distributor will answer all six without hesitating.

The last one matters. Everything should be in your name, with your PAN, your bank account and your nominee.

Five, and we have seen all of them locally.

A promised return. Nobody can promise a market-linked outcome. Walk away.

Money asked for personally, in cash or to a personal account. Payments go to the fund house, never to a person.

Pressure and deadlines, especially around the end of the financial year or a scheme launch.

Blank forms to sign, or forms filled in later.

No paperwork in your name, or statements that come only from them rather than the fund house.

Our post on families who lost money describes where those patterns end up.

Less exciting than the sales version, and more useful.

Gets your KYC and folios set up correctly. Keeps your bank details, address and nominee current. Handles redemptions, switches and the paperwork when something changes. Tells you when a request has no chance and why. Picks up the phone in a bad market and talks you out of a decision you will regret.

Our post on the work you never see covers this side, which is most of the job.

A good first year looks fairly quiet, and that is how it should be.

Your KYC and folios are set up, the SIPs run, statements arrive from the fund house in your own email, and your distributor contacts you once or twice with something useful: a nominee missing, a mandate limit too low, a date that keeps failing.

You should also find that separate goals are kept in separate pots, so money for something near, like a planned trip, is not mixed with money meant for retirement.

What you should not get is a stream of new product suggestions. If every conversation ends with something to buy, that is a sales relationship rather than a service one, and it is worth noticing early.

You can, and you do not need permission from the current one.

It is a form with the fund house or registrar, and your units are not sold or moved in the process. There is no tax event and no exit load, because nothing is redeemed.

Our post on changing your mutual fund distributor explains the steps. You can also move to direct plans if you would rather do it yourself.

Both work, and they suit different people.

An online platform is fast and cheap and expects you to make your own decisions. A local distributor costs a little more through the regular plan and gives you somebody who answers the phone and knows your family situation.

Where we find the local version matters most is in the awkward months: a death in the family, a folio nobody can find, a redemption that has not arrived. Our city pages, such as working with a distributor in Indore, cover how we work.

If you want to talk to us before deciding anything, get in touch. There is no charge and no obligation.