How to Appoint a Sub-broker for Mutual funds in India?

A mutual fund is a professionally-managed investment scheme. It uses money from many investors to invest in stock, bonds and other types of securities. The mutual fund is usually run by an asset management company that brings together a group of people who would like to invest money for substantial growth in future. There is a fund manager, who decides how to incorporate the money of the investors in different stocks. The mutual funds are generally ‘open-ended’, which means that new investors can join the fund at any point in time. There are thousands of different kinds of mutual funds based on different types of business and investment style floated in India. All mutual funds are registered with SEBI. There are strict rules and regulations formulated to protect the interest of the investor in mutual funds.

Investing in mutual funds is considered a good move if you want to make your money grow in future. You can invest the money either independently, or you can appoint a sub-broker for this purpose. There are a lot of benefits when you take the help of a sub-broker while investing in mutual funds. But you need to be cautious while appointing them. A few points which should be kept in mind while appointing a sub-broker are listed below.

Amfi certification

The market regulator SEBI has made it mandatory for the sub-brokers or the mutual fund advisors to pass a certification test and obtain the registration number from Amfi. The institutions which sell mutual funds have also been directed to enlist only the Amfi certified sub-brokers as mutual fund advisors. The insurance regulator of India IRDA has also made it mandatory for advisors to pass the agents test before they intend to sell indemnity or investment products. So, it can be said that you should make sure that the sub-broker is Amfi certified before appointing him to sell mutual funds. It is implied the advisors who have cleared the AMFI Certification Examination, should have a thorough knowledge about the different types of mutual funds. They should also have an idea of the type of funds which is best suited for your financial and investment needs.

Periodical Consolidated Report

The mutual fund sub-broker needs to provide the clients a periodical consolidated report based on the absolute return, annualised return, profit/loss, the investment summary, transaction and dividend report. You need to view them, from time to time to access your financial investment for a particular period. Your auditor may also request these consolidated reports to track your total investment made during a financial year. A good mutual fund sub-broker should have all these reports ready for his client. So, before appointing a sub-broker, ask for samples of the consolidated report which he had made earlier.

Updated Knowledge

The mutual fund sub-broker should possess updated knowledge about the different types of Equity funds (Diversified / Sectoral / Index Funds). He should also have knowledge about the Debt funds (Gilt / Income / Floating / Short Term Plans / Liquid Funds) and Tax Saving ELSS to the Hybrid funds (MIPs / Balance / Arbitrage Funds). The mutual fund advisor should serve as your one point service for multiple needs. He should guide you to invest in those funds which would give you more capital return in the long run.

Help in Filing Income Tax Return

The mutual fund sub-broker should send you the capital gain report comprising both the short-term and the long-term capital gains, at the end of the year. You need this report at the time of advance tax payment and during the filing of income tax returns. 

It is a good idea to keep in mind the above-mentioned factors before appointing a sub-broker for mutual funds in India.