New Delhi, March 7, 2022: Association of Mutual Funds in India (AMFI) today announced launching of an ‘Internship Plan’ under a Regulatory Sandbox initiative of the industry for new qualifying individuals who can be groomed to be Mutual Fund Distributors (MFDs) with an objective to increase number of individual MFDs across the country and stimulate financial inclusion.
The Internship Plan is being piloted under a Regulatory Sandbox project approved by the Securities & Exchange Board of India’s (SEBI) to increase the number of individual MFDs in the country.
The Internship Plan is targeted towards Fresh Graduates, educated but unemployed individuals, especially those who may have lost their jobs and earnings due to the Covid pandemic, retirees, women and housewives who may have taken a mid-career break to take care of their young ones, and all of those now desirous of starting their own venture as self-employed entrepreneurs.
The Internship Plan shall be sponsored by individual Mutual Fund Houses, and aims to create a scalable and sustainable business model for self-reliant entrepreneurs, and in the process not only help expand the individual MFD base but also contribute towards the larger objective of financial inclusion.
Individuals aspiring to become MFDs under this scheme will have an exclusive empanelment and tie-up with a specific ‘sponsor’ AMC for a period of 12 months. During this period, the apprentice MFD will be supported by the sponsoring AMC towards getting the requisite NISM certification, acquiring AMFI Registration Number (ARN), operational set-up, training on operational aspects and client acquisition along with a stipulated monthly stipend of up to ₹15,000 for a maximum of 12 months. The apprentice MFD will be empanelled with only one sponsor AMC during the period of apprenticeship but will be free to empanel with more AMCs after the completion of this initial period.
As per the current SEBI regulations, AMCs can pay only trail commission to distributors and no upfront commission is permitted. Although the trail commission model aligns the interests of investors, distributors and AMC by taking away any perverse incentive to churn investments, it takes a few years to build a sizeable AUM that could provide reasonable amount of subsistence income by way of trail commission especially for new entrants.
Under the Regulatory Sandbox initiative, SEBI acceded to AMFI’s request for relaxation in the above stipulation, so that the AMCs could pay a reasonable stipend to the trainee MFD during the initial phase of her/his career for a maximum of 12 months, till the apprentice MFD builds up sustainable clientele & AUM. This innovation will help new and talented MFDs to build a self-reliant, successful and sustainable business model under watchful guidance of sponsoring AMCs with adequate incentives to all stakeholders in both short and long term.
Mr. A. Balasubramanian, Chairman, AMFI said: “When we released the AMFI BCG ‘Unlocking the ₹100 Trillion Opportunity’ whitepaper, we had envisioned growing the Mutual Fund Distributor base from around 1 lakh distributors to 5 lakh distributors. Thanks to the SEBI Regulatory Sandbox, we are looking to add around 5,000 apprentice MFDs this year who will be trained and supported by the industry till they are ready to be on their own. This initiative will work towards the Prime Ministers vision of ‘Atmanirbhar Bharat’ by creating self-motivated and self-reliant entrepreneurs across the country.”
Mr. Vishal Kapoor, Chairman of AMFI’s Standing Committee on Certified Distributors and a member of the AMFI Board, who spearheaded this project at AMFI said, “This is a great opportunity for individuals who wish to start their own venture as an entrepreneur and participate in the steadily growing world of mutual funds, but need initial hand-holding to build sustainable scale and stimulate financial inclusion”.
Speaking on the occasion, Mr N S Venkatesh, Chief Executive, AMFI said: ““This initiative of Apprentice MFD aims to ramp up the distribution footprint thereby widening the investor base for the Mutual Fund industry across the country. In addition, this program aims to create self-reliant entrepreneurs that will aid the larger objective of financial inclusion.”