The Challenges Faced by a Mutual Fund Agent

The mutual fund industry is at an all-time high.

According to a report from the Association of Mutual Funds of India, the industry experienced a 31% compounded annually growth rate (CAGR), between 2014-2018. This shows that the household’s share of net financial assets has increased by a whopping 21%. From 3% to 6 percent. Between 3% and 6%. The 6% proportion of mutual funds in financial assets is 3.6% of total household savings.

The rise of individual investors was another trend that has characterized the four years 2014-2018. Individual investors increased their share of AUM by 48% to 58% over this time.

Nevertheless, there are compelling reasons to believe it won’t be easy for your Mutual Fund Agent.

Agents in the industry are now facing the toughest challenges, especially in light of recent headwinds.

We want to inform you, the investor about the difficulties faced by mutual fund agents. It has been difficult for them to survive in this industry and grow.

SEBI Rules

In its desire to assist investors, the Securities and Exchange Board of India(SEBI) has failed to recognize their basic needs. It appears to have put a halt to the functioning of the industry. Many of the regulations and rules have little to no benefit for investors. Instead, they provide financial advice that can be relied upon with great comfort.

It’s all well and good to regulate. The miscreant is the most important. However, stifling agents and distributors could have a negative impact on the industry. These people worked hard to bring the industry to its current heights.

Let’s now talk about the viability and impact of SEBI’s rules on the entire industry.

Aug. 2009: Removal of Entry Load

This is a great move for investors. It has also been well received by advisors and agents. It has reduced the number of NFOs sold.

Together, this move and the recession played a significant role in getting rid non-serious agent. Only those who were able to demonstrate their worth to investors on a long-term basis stayed. The revenues also suffered as a result.

Direct plans introduced in January 2013

Agents were again faced with serious threats. They welcomed it. Due to the low penetration of mutual fund in India. Only 2-3% of Indians invest in mutual funds.

The agents faced a daunting task: mobilize the remaining 97%. Many of them were happy to have increased awareness about Direct Investments Schemes.

The truth is, a large portion of these investors fled when the market crashed.

Capping Upfront Commissions (Feb 15, 2015)

The maximum amount of upfront commissions allowed is 1%. This was used to be determined by AMCs. This was not for agents or distributors. There was no cap in the past. It also varied between fund houses.

Again, this move was motivated to benefit the investor. SEBI did not follow the mode of operation. The AMCs had previously paid this commission out of their own pockets. Because there was a cap on the expense ratio. AMC was created to guarantee AUM for three years, then to recover the commission from NAV.

The upfront commission cap did not reduce the amount paid, but it adversely affected sales.

Special Regulations for Advisors and Agents

  1. Investment advice is not offered by agents. All businesses want to grow. Money is their motivator. Agents must not be registered as financial planners or investment advisors. This will make it difficult for them to improve their services. Mutual fund investments do not depend on providing advice. These mutual fund investments are part of financial planning. Financial planning should, in the ideal, be based on sound, goal-based investing advice. If advisors and agents don’t know the investor’s goals, how can they suggest products?
  2. Financial advisors are not allowed to distribute. The next question is about their family members and other relatives.
  3. SEBI must register distributors who deal in shares, debentures or bonds, as well as derivatives.

Challenges Faced

Illiteracy and Unawareness

India has more than half its population without access to formal banking services. A 2012 World Bank Global Findex report found that only 35.23% Indians have an account at a bank or other financial institution. You might also have an account with another person. India continues to lag in savings indicators, whether at formal or informal institutions.

Work experience or qualifications

It is important to qualify to be a mutual fund agent. This shows that you are more than just a graduate. However, you can never discount work experience. This proves you’ve been through many market cycles. This proves your ability to recommend portfolios that can withstand market volatility.

Sebi also needs to relax the requirements for minimum qualifications and work experience for agents if they want MFs to penetrate rural areas.

No one expects that a person with ten years of work experience or an MBA will want to settle down in rural India to sell mutual funds. This is especially true when commissions are on the decline.

Are Agents required to charge a separate fee from clients?

Contrary to popular belief most mutual fund agents are not required to charge a fee for their services. Their competition may offer their clients freebies and then poach them. Even though they are not required to collect commissions, customers will still pay.

Language complications

There are mutual fund plans that have something for everyone. AMCs offer a wide range of schemes to meet investor’s needs, such as their risk appetite, desired returns, and time horizon. The best schemes are available to investors. The structure of the fund – Closed-ended or Open-ended funds. Or according to the purpose of their investment – Growth Funds or Balanced Funds. Income Funds or Money Market Funds.

However, having so many products can scare an agent rather than inform them. Agents with a strong team can reap the benefits of these plans. However, they can be intimidating for a regular agent who is operating alone. Even if they are from semi-urban areas or rural areas. A person who is not financially well-informed and doesn’t have the time or effort to research.

Number of agents & efficiency

The total number of ARN (AMFI Registry Number) holders was 52,000 as of March 2013. Of these, 48,000 were individual holders of ARN. The remaining 4000 are corporate ARN owners. These numbers may seem large but only 18% of total reported figures are active.


There has been a lot of mis-selling by agents. The agents are often depicted in black by many articles, opinions, and comments from various media outlets, including the internet. They may not be the most sympathetic to their problems.

Is it their fault?

Financial experts will tell you that mutual fund houses and asset management companies are equal partners in this crime.


A slew new, innovative and far-reaching Mutual Fund distribution models have emerged. This poses a challenge to traditional agents. Many of these models are self-oriented. These models are designed to provide a simple, low-cost and transparent investment experience for internet-savvy millennials.

PayTm, Amazon, and other e-commerce platforms are also going to disrupt the MF distribution industry in the future. To remain relevant, traditional agents will have to reinvent themselves by collaborating with online portals.