Distribution Versus Advice
Selling a product and advising on it are regulated separately. This lesson sets out what a mutual fund distributor may do, what counts as investment advice, how a distributor and a SEBI-registered investment adviser are each paid, and why titles are restricted.
Two activities, two registrations
A mutual fund distributor holds an ARN from AMFI and sells schemes. An investment adviser is registered with SEBI under the SEBI (Investment Advisers) Regulations, 2013, and is often called a registered investment adviser or RIA. The two registrations permit different things.
A distributor may give only incidental advice, that is, advice connected with the products it is distributing. Explaining what a scheme invests in, its risks and its costs is part of selling it.
What counts as investment advice
Under the 2013 Regulations, investment advice includes financial planning. Preparing a financial plan for a client, or giving continuing advice on a client's whole portfolio, is therefore investment advice, and anyone offering it must be registered with SEBI as an investment adviser.
An ARN does not stretch that far. It allows a person to distribute mutual fund schemes and to give incidental advice on them. It does not cover preparing financial plans.
How each is paid, and why titles matter
The two are paid in opposite ways. A distributor receives commission from the fund house, out of the expenses of the regular plan. A registered investment adviser is paid a fee by the client and cannot earn distribution commission on that client's investments. Advice and distribution are kept separate, so that for any one client a person is paid in one way.
Titles follow from this. A distributor may not call itself an adviser, wealth adviser, financial planner or anything similar unless it holds the SEBI registration; it must use the description AMFI-registered Mutual Fund Distributor. Knowing which of the two one is dealing with tells an investor how that person is paid.
Neither registration changes the nature of the investment. Whoever is involved, the investor bears the market risk of the schemes bought.
Rules at a glance
Two requests to the same distributor (illustrative)
Meenal, an AMFI-registered Mutual Fund Distributor, is asked by an investor how two schemes she distributes differ in what they hold, their riskometer levels and their expense ratios. Answering is incidental to the products she distributes.
The same investor then asks her to draw up a complete financial plan covering retirement, children's education and insurance, and to review it every year for a fee. That is financial planning, which is investment advice. Meenal may not offer it on the strength of her ARN; it needs registration with SEBI as an investment adviser.
Key points
- A distributor may give only incidental advice on the products it distributes.
- Financial planning and portfolio advice are investment advice and need registration with SEBI as an investment adviser.
- A distributor is paid commission by the fund house; a registered investment adviser is paid a fee by the client.
- A registered investment adviser cannot earn distribution commission on the same client's investments.
- A distributor may not use titles such as adviser or financial planner without that registration.
Common misunderstandings
- A distributor is not an investment adviser: an ARN covers selling schemes and incidental advice on them, not financial planning.
- A registered investment adviser is not paid by the fund house: the client pays a fee, and no distribution commission is earned on that client's investments.
- Adviser and financial planner are not titles open to anyone: a distributor may use them only if registered with SEBI as an investment adviser.
Questions people ask
May a distributor say anything at all about a scheme?
Yes. It may give incidental advice on the products it distributes. It may not offer financial planning or advice on a whole portfolio without registration as an investment adviser.
Why can a registered investment adviser not take commission on a client's investments?
Because advice and distribution are kept separate. The adviser is paid a fee by the client and cannot also earn distribution commission on that client's investments.
How can an investor tell which of the two they are dealing with?
A distributor must describe itself as an AMFI-registered Mutual Fund Distributor, with its name and ARN. An investment adviser holds a registration with SEBI.
What this lesson relies on
- SEBI (Investment Advisers) Regulations, 2013
- AMFI code of conduct for mutual fund distributors
- SEBI Master Circular for Mutual Funds, 20 March 2026 (distributor commission)
This lesson was reviewed independently against these sources on 8 October 2026. Rules change: check the current regulation, scheme document or policy wording before relying on any figure. This is education, not advice.