The goal of a mutual fund advisor is to help clients grow or preserve their wealth and reach financial goals by investing in mutual fund schemes. MF advisors offer tailored financial advice to investors after assessing their investment horizons, risk appetite, and financial goals. A mutual fund investment advisor can earn commissions directly from a fund house or through distributors who sell the schemes of the house.
Mutual funds advisors offer expertise in both selecting and making a portfolio of mutual fund schemes that align with the financial goals of investors. This requires that the MF advisor take initiative to track a variety of mutual funds schemes with different investment objectives while also keeping updated with crucial events in the financial market that could impact the performance of these schemes.
Role of a mutual fund investment advisor
Understanding the needs of investors: It’s vital that mutual fund advisors aim to understand their clients’ goals as well as the time frame to execute those goals. Their advice will be based upon the purpose the client has — be it retirement savings, wealth creation, planning to pay for higher education or others.
Educating their client: The next role a mutual funds advisor plays is of educating their client regarding the currently available financial products, particularly those suited to the goals of the client. In some cases, advisors may have to go deep and educate investors about investment constraints they may be facing.
Evaluating the risk appetite of investors: Certain investors are aware of their risk tolerance and may state it to their advisor upfront. Others may not be aware and hence need to be evaluated by their mutual funds advisor for the same. Being wary of how much risk one can take on in their investments is essential to create a sustainable financial portfolio. Hence, mutual funds advisors play a crucial role in aiding clients to become aware of their own capacity to bear the risk.
Analyzing Investment Options: Assessing the variety of investment options and presenting curated options to clients is one of the roles of MF advisors. MF advisors are trained to assess the performance metrics of mutual funds and compare schemes to identify the ones best suited to their clients’ goals.
Portfolio Diversification: Mutual fund investment advisors tend to focus on portfolio diversification as a goal for most of their clients. Having a diverse portfolio negates the possibility of experiencing too much volatility and risk with one’s investments. The advisor aims to minimize risk by optimizing one’s portfolio.
Maintaining financial records: Another essential job of a mutual fund investment advisor is maintaining financial records of their clients. These records consist of transaction details, income details and more.
How to Become A Mutual Funds Advisor
To become an MF advisor, follow these simple steps:
1. Register for the NISM exam
Candidates wishing to become MF advisors should first register for the National Institute of Securities Market (NISM) VA Mutual Funds Distributors Certification Exam. This can be done by logging into NISM’s official website and paying a registration fee of ₹1500. One’s test will be conducted at officially vetted NISM centers. Once the registration is successful, the candidate can download a PDF file that will help them prepare for the exam. One can also study from hard copy textbooks or through the online course material.
2. Pass the NISM Exam
If the aspiring candidate passes the NISM exam, they will receive their certification to be a mutual funds advisor. This certificate will become available about 30 days after their test results as a hard copy, but its e-format can be downloaded instantly once test results become available. From the date of the examination, the certificate’s validity lasts a total of three years. The CPE Program also has a validity of three years.
3. Know Your Distributor
After passing the exam and getting certified, the candidate should undergo a mandatory Know Your Distributor process. This will happen when they apply to the Association of Mutual Funds in India (AMFI) so they can obtain an AMFI Registration Number (ARN) to begin either selling or advising on mutual funds schemes in India. The candidate will be requested to provide their PAN, NISM Distribution certificate number, Identity details, and other information into the application form for ARN.
All forms that are duly filled need to be submitted through CAMS-KRA(KYC Registration Agency) either physically in a CAMS office or online as per the requirements. Once the documents are successfully verified, the ARN number will be assigned to the candidate (now a mutual fund agent), and their card will be delivered to the address mentioned in one’s application within a few days’ time.
4. Register with AMCs or Distributors
Once the mutual fund agent has obtained their ARN number, they are now a fully-fledged MF advisor. Now they can begin selling to clients and start earning commission for the same. The next step is to enter into agreements with AMFI distributors to sell these funds. Distributors pay a commission that is agreed upon based on the number of mutual funds schemes sold by the advisor. The advisor also has the option to enter into agreements with fund houses or AMCs themselves, rather than their distributors, for selling mutual funds.
The Bottom Line
Becoming a mutual funds advisor is a reputable job due to the plethora of roles MF advisors play. They manage portfolios for risk, assess their client’s financial goals, and carefully track funds they can curate for their clients. The process to become a mutual fund investment advisor is straightforward and well established. With one’s NISM accreditation and ARN number, one has the right to practice being a distributor or seller of mutual funds in India.