Most people hesitate to invest through a mutual fund distributor (MFD) because they assume there will be extra charges. Many confuse MFDs with financial advisors who typically charge a fee. But here’s the truth: MFDs don’t charge you directly. That often leaves people wondering—how do they earn, then?

Let’s break it down in a simple way.

Who is a Mutual Fund Distributor (MFD)?

Basically, a mutual fund distributor in Hyderabad is someone registered with AMFI (Association of Mutual Funds in India) and allowed to sell mutual fund schemes and, many investors rely on MFDs for support, especially if they’re not familiar with investing.
It’s important to know that MFDs are not financial advisors.

● MFDs can distribute mutual fund products.
● Financial advisors (RIAs) can advise and charge a fee for that advice.

SEBI (Securities and Exchange Board of India) clearly defines what MFDs are allowed to do.

What Can an MFD Do?

MFDs cannot give personalized financial advice. But they can help with:

1. Mutual Fund Distribution
Explaining basic details of mutual fund schemes—like equity, debt, hybrid, or ELSS plans—and helping you invest.

2. Transaction Support
They support you through paperwork or online investment processes.

3. KYC Assistance
They help complete your Know Your Customer (KYC) process, which is required before investing.

4. Investor Support
They offer help with account statements, portfolio tracking, fund switches, and updates.

5. Education
They share general information about how mutual funds work, risk levels, and market basics.

6. Ongoing Service
They send reminders, track your SIPs, and help with withdrawals or redemptions when needed.

Note: AMFI registered mutual fund distributors in Hyderabad are not allowed to give customized investment advice or charge advisory fees.

So, How Do They Earn?

If they’re offering all this support, but not charging you, how are they paid? Well, they get paid by AMCs. Basically, they earn a commission from the AMC whenever they help an investor invest in a fund.

There are two types of commissions:

1. Trail Commission (Main Source)
For example, if you invest ₹1,00,000 through an MFD and the trail commission is 0.5% annually, the MFD earns ₹500 per year from the AMC—not from you.

The more your investment grows, the better for both you and the MFD.

2. Upfront Commission (Rare Now)
Earlier, some AMCs paid a one-time commission when a new investment was made. But SEBI has discouraged this. Most AMCs now focus only on trail commissions.

What If You Invest in Direct Plans?

Mutual fund schemes come in two types:

● Regular Plans (via MFD): Commission paid to the distributor.
● Direct Plans (DIY): No distributor, so no commission is paid.
If you invest through a direct plan, you don’t use an MFD’s service—and they don’t earn anything from that.

Should You Use an MFD?

Choose an MFD if:

● You’re new to investing.
● You want personal support and regular updates.
● You prefer human interaction over online platforms.

Choose direct plans if:

● You understand mutual funds well.
● You can manage your portfolio on your own.
● You’re comfortable with online investing tools.

Conclusion: They Earn from AMCs, Not From You

To sum up, if you're investing through an MFD, you're not paying them any fees. This model works well because it keeps your costs low while encouraging MFDs to maintain long-term, meaningful relationships with their clients.