Educate Yourself

Mutual Fund Distributor

What should you know about your Mutual Fund Distributor?

Mutual Funds are often associated with a number of myths. However, once you do your research, most of these myths are busted. There is another way to go about clearing your doubts about mutual funds: you can approach a Mutual Fund Distributor. Well, before you select a distributor, you may want the following questions to be answered:

    1. How qualified and experienced is the distributor?

      Understanding mutual fund schemes, suggesting asset allocation strategies and knowing how portfolio changes affect you require expertise. Hence, it is imperative that you check how knowledgeable your distributor is and also investigate the type of experience he possesses. The distributor, an individual or a company, should be able to identify and suggest products based on your risk appetite and goals. Further, he needs to understand different asset classes and be familiar with the processes that need to be followed at every step of investing.

    2. What is revert time from the distributor?

      Considering you have taken the investment decision based on the distributor’s advice, his accessibility is very important. Any queries that you have with regard to your investments should be answered by the distributor or his company in a reasonable time frame. Time is an important element in financial services and the distributor should be able speed up the application process. He should be accessible personally, via email or by telephone.

    3. Does the distributor offer comprehensive services?

      Finance and Investments are confidential topics and generally investors are not comfortable discussing them with too many people. Hence, it is advisable to avail the services of the distributor who is unbiased, can offer you products from all fund houses and will handle your investments with confidentiality.

    4. How do I check his past record?

      Currently, there is no formal ranking or rating system for distributors in India. Hence, you will have to do some basic fact finding about the distributor. Finding out what areas he has worked in and what kind of knowledge he possesses could be a good indicator. Also, a distributor who has gone through a few market cycles can be one way of checking his credentials.  Besides, in today’s digital world, it is not very difficult to run a background check. You can use social media and read about what others have to say about him. You can also check online for referrals and ask for references from your relatives or friends.

    5. Who pays the distributor?

      The distributor plays an important role in hand holding the investor in his financial journey by suggesting products, drawing up a financial plan based on investors risk appetite, future needs and goals.  So, there are a couple of ways in which the distributor can be compensated. If he uses a distribution model, the fund houses in which he suggests you make your investments pays him a commission for every investment made by you. Some distributors may charge you a fee for their time spent, understanding your requirements and suggesting a plan.  There are also quite a few free online portals that gather data from investors and suggest a financial plan.

      Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
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