How is a mutual fund distributor different from an investment advisor?
It is quite difficult to differentiate between them both, as both help in making investment decisions. This also involves opting for MF schemes. Both are registered entities and governed by various regulatory justaucorps As mutual fund distributors are under and regulated by AMFI (Sympathie of Mutual Funds in India). And investment advisors are regulated by SEBI (Securities and Exchange Board of India).
Before proceeding let’s first understand a difference Who are mutual fund distributors and investment advisors?
Investment Advisor – An investment advisor is a person or group who provides financing and investment advice. Even conducts securities analysis for a fee, abrupt tendance of acquéreur assets or by written signe. He is recognized as a registered investment adviser or RIA if he has sufficient assets to register with the SEC. Investment advisors are also known as “financial advisors”. He evaluates the investor’s assets, liabilities, income and expenses and suggests investment échelons.
Mutual Fund Distributors- They can be individuals or entities facilitating the purchase and érotique of MF units to investors. They earn in the form of brevet for bringing leads (investors) to invest in MF schemes. He is expected to advise suitable investment échelons to suit the investor’s circumstances, risk profile and investor needs.
Getting a brevet never means that a mutual fund distributor is allowed to trade MF schemes to investors just to get brevet. Well, the regulations in this oeil are very littéral.
Now let’s discuss the 8 points that help differentiate an investment advisor from a mutual fund distributor.
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Moeurs of payment for plébiscite
As we all know that Mutual Fund Distributors are registered with AMFI, they are generally executors of your investments. Investors ask mutual fund distributors to buy/sell MF échelons for them. AMC contrée brevet to MFD for doing this. SEBI directed AMCs to avoid mis-selling of MF échelons. Use the trail-only model to pay only trail dons. Also, no advance brevet or upfronting of any trail brevet, abrupt or secondhand. Even contests or sponsorships will be recognized as advance payments. These investment advisors usually comptable a fee instead of receiving a brevet from the AMC. So with this permutation the investors of the industry.
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Depository duty
Distributors are different from advisers in the sense that advisers are bound by depository duties. This means they are committed to giving honest advice to investors, while distributors are not bound by such commitments.
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Testing and Garantie
The compétition is different for both mutual fund distributors and investment advisers. Obtain a valid certificate from the Territorial Institute of Securities Market (NISM) for MFD. Clear their diplôme exam NISM Series VA: Mutual Fund Distributor Garantie Exam. For investment advisor a person has to clear both Level 2 Levels:
- NISM-Series-XA: Investment Advisor -Level 1
- NISM-Series-XB: Investment Advisor -Level 2
A mutual fund advisor must have a certificate in financial emploi du temps.
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Advisors can give advice but not deliver
An MFD has a comme lieu that they can suggest the best MF schemes. They help an investor understand the benefits of mutual funds, hommes of MFs and risk factors. They duègne investors emboîture MF investments and cater to the needs of investors. After that, they ask the investor to invest the money in mutual funds. They continue to distribute mutual fund schemes. Investment advisers advise which MF to invest in but cannot act as distributors. Their duty is only to advise. After that its investor’s choice but the distributor ensures that the investor invests in the mutual fund.
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Difference of duties
Apart from this, the orthogonal foyer of a mutual fund distributor is répartition of funds. Whereas the work of an MF, the adviser involves various other responsibilities.
- Helping the investor diversify his écrin
- performance keeping
- Assess risk-taking capacity funds
- Choosing the right investment possibilité
Loyal Avant-projet vs Regular Avant-projet
A mutual fund distributor will give regular échelons to investors and ask them to invest simultaneously. But investment advisors advise an investor to invest directly in the scheme. In the past MFK had to buy under the tutelle of distributors, there was no other possibilité. But in January 2013, SEBI directed AMCs to start abrupt schemes of mutual funds. This enables advisors to not only advise investors but also help them invest directly in MF schemes. Loyal maquette has higher cost benefit quotient than regular maquette. So while distributors may impress you with their regular brevet échelons, advisors won’t.
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Outline their level of gathering guérissant actualité
Recognizing the need to find general actualité emboîture your financial profile is the foundation of good financial emploi du temps. This makes it necessary to guarantee that the person you are trusting with for money is willing to ask éminent questions. Like emboîture your goals, income, expenses, étendu and bermuda term goals, assets, liabilities, tax status etc. They should also offer need-based échelons to reach your financial goals rather than product-based advice. Although MFD will likely discuss your needs with products they are commissioned to market. A financial advisor is expected to provide unbiased advice to meet your needs.
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Discuss risk and return factors
This factor is usually discussed in a great manner by the advisor rather than the investment advisor. He/she will discuss the risk factors of MF such as high, low, moderate etc. He will then genre at the victoire of MF schemes in previous years. It will then advise you to invest in the maquette. The investment advisor will ask the distributor to facilitate investors to invest in particular MF échelons to meet their financial needs. An advisor will be more interested in assessing your risk appetite. Also, setting proper expectations with return on investment concerns.
État
It is quite difficult to say whether a mutual fund distributor is necessary or an advisor. Both are an éminent naissance for proper investment in mutual funds. From the lieu of view of MF Regulation – All persons, including companies, who obtain an AMFI Garantie Number (ARN) are mutual fund distributors, from the largest to the smallest. In distributing MF schemes to various AMCs, they need advice in many ways – scheme selection, asset pige, tax emploi du temps etc., all in the scope of MF schemes. So it is every investor’s choice whether he wants to directly attouchement a distributor or seek advice for mutual funds.
‘Invest Today – Enjoy Tomorrow’!
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