Why are more MFDs being registered this financial year?

As awareness surrounding mutual funds continues to increase, so is the number of MFDs who are registering their ARN (AMFI registration number) with the Association of Mutual Funds in India (AMFI). So far in the financial year, there have been 31,309 registrations. This is an increase from the 23,787 registrations that took place in the corresponding period last year, nearly 32% higher.

Additionally, the number of individuals who are registering so far in the financial year have also had a substantial increase, with 14,038 in April-September 2024 compared to 10,108 in April-September 2023, a 40% increase.

September 2024 also shows a particularly high registration count for Individual ARN registrations at 2,812 compared to 1,850 in September 2023. A 52% increase.

Here is a table showing the increase in new ARN registrations from 2022-2024:

Despite an increase overall, monthly data shows fluctuating registration patterns in 2024. ARN registration numbers in August 2024 dropped by 15% in September 2024, a decrease from 3,290 to 2,812.

Here is a table showing the month-on-month changes in ARN registrations for 2024:

To better understand this increase in registrations over the last years, Cafemutual spoke to expert MFDs.

Chennai based MFD Chokkalingam Palaniappan of Prakala Wealth Pvt Ltd

Chokkalingam explained how this number can be tied to the increase in awareness surrounding mutual funds and the potential for growth. Post covid especially, the market has continued to grow considerably.

The only way the number of ARN numbers would go down would be through regulatory change. Chokkalingam brought up how when upfront commission was abolished, the number of MFDs dropped. Similarly, should there be any regulatory change to trail commissions, ARN registrations would slow down.

Mumbai based MFD Nikul Parmar

Nikul attributed this growth to awareness. He explained how as mutual funds continue to rise, so will the number of ARNs. He brought up how MFDs now opt for an ARN number through an LLP (Limited liability partnership), potentially explaining the drop in registrations between August and September.

Roorkee MFD Gaurav Giri, CEO & Founder at Nivesh Salahakar Pvt Ltd

Gaurav explained how mark-to-market increases have pushed many distributors into the GST range as their commissions (including brokerage) reach Rs. 20 lakh, requiring GST registration. To manage this tax obligation, distributors often either obtain two ARN numbers or divide their income among family members.

However, breaking even in this business has become challenging for MFDs who aren't associated with NBFCs (Non-Banking Financial Company), particularly due to rising expectations of investors. While the increasing number of MFDs is positive for market awareness, success requires proper business practices, which is what Gaurav advises to the new generation of MFDs.