Mutual Fund Mastery interview preparation

Questions

100

Traced to a firm

32

Firms

19

Updated

September 2026

Asked at

All firmsVanguard5BLBlackRock3FTFranklin Templeton3Invesco3PIMCO3Fidelity Investments2J.P. Morgan2Morningstar2Neuberger Berman2SCSchroders2T. Rowe Price2Amundi1BMBNY Mellon1Goldman Sachs1Man Group1Northern Trust1SSState Street1Sycamore Partners1WMWellington Management1

Topic

All topicsFund structure and regulation7NAV and operations6Scheme categorisation4Equity schemes5Debt schemes7Risk, liquidity and disclosure7Index funds and ETFs6Hybrid and solution schemes3Costs, plans and commissions6SIP and investor mechanics5Performance measurement6Taxation5Distribution, compliance and NISM5Portfolio construction and advice5Estimation and numeracy5Markets and industry6Career and fit12

Level

AnyCoreIntermediateHard

Type

AnyTechnicalCaseFitBrainteaserMarket view

1. 049How does a mutual fund distributor actually get paid, and why did SEBI ban upfront commission?Costs, plans and commissionsIntermediatetechnicalDistribution and salesIndian AMCs

   Say this

   Trail only, since October 2018. The AMC pays a percentage of the assets the distributor has brought in, every year, out of the scheme's expense ratio. Upfront commission was banned because it paid the distributor for the transaction rather than for the holding, and that produced churn.

   Then walk it

   1. How trail works: typically 0.5 to 1.2 percent a year on equity assets, paid monthly or quarterly on live AUM under the distributor's ARN. Stop servicing the client and the money keeps coming as long as the units stay.
   2. The old model paid 1 to 2 percent upfront on a new sale, sometimes more on close-ended NFOs. The incentive was obvious: move the client into a new scheme every year and get paid again. The client paid the exit load and the capital gains tax.
   3. SEBI's response was to move the whole industry to full trail, ban upfront, and require that every rupee of commission come out of the scheme rather than from the AMC's own books, so nothing is hidden. It also stopped AMCs from paying for distributor travel and events.
   4. One carve-out survives: for genuinely first-time investors, a limited upfronting of trail on small SIPs is permitted, because the economics of servicing a 500 rupee SIP otherwise do not work.
   5. There is an additional permitted charge for inflows from beyond the top 30 cities, which is the industry's geographic expansion subsidy, tightened repeatedly after it was gamed.
   6. The honest result: churn fell sharply and distributor economics shifted from hunting to farming, which is better for investors. But trail also pays for doing nothing, and it scales with the corpus rather than with the work — which is the structural argument for fee-only advice.

   Where candidates lose it

   Not knowing the 2018 date or claiming upfront commission still exists. Also, EUIN matters here: the employee's unique identification number must be on the form so the individual who advised is traceable. If you are interviewing for a distribution role, know what ARN and EUIN are.

   Expect next

   • What is an ARN and what is an EUIN?
   • How did churn actually change after 2018?
   • Is trail commission a fair way to pay for advice?
2. 050How do exit loads work, who keeps the money, and are they part of the expense ratio?Costs, plans and commissionsIntermediatetechnicalIndian AMCsFund operations

   Say this

   An exit load is a percentage deducted from the redemption value if you leave within a stated period, typically 1 percent within a year for an equity fund. It goes into the scheme, not to the AMC, and it is not part of the TER. Entry loads have been banned in India since August 2009.

   Then walk it

   1. Mechanics: the load applies to the units being redeemed, on a first-in first-out basis, and GST is charged on it. The SID sets the structure and the AMC cannot vary it for individual investors.
   2. Since 2012 exit load proceeds are credited to the scheme, so remaining unitholders benefit. That changes what it is — not a fee, but a transfer from the departing investor to the ones staying.
   3. The purpose is to make short-term money pay its own dealing costs. When you redeem, the manager sells securities and the fund pays brokerage and impact; the load offsets that so long-term holders are not diluted.
   4. Typical structures: 1 percent within 12 months for equity funds, nothing thereafter. A graded scale of a few basis points for liquid funds redeemed inside seven days, introduced after 2019. Nil on overnight funds. ELSS has none because the lock-in does the job.
   5. It stacks with tax. Redeeming an equity fund at month eleven costs 1 percent load plus 20 percent short-term capital gains. Waiting four weeks removes both, and that is often the single most valuable thing a distributor tells a client all year.
   6. Entry load being banned in 2009 was the more consequential reform. It is why Indian distribution moved to trail and why the direct-versus-regular gap, rather than a front-end charge, is where commission now lives.

   Where candidates lose it

   Saying the AMC keeps the exit load. It goes to the scheme. And do not forget to combine the load with the capital gains position when advising — an interviewer will hand you a client at month eleven and see whether you spot both costs.

   Expect next

   • A client wants to redeem an equity fund at month eleven. What do you advise?
   • Why was entry load banned?
   • Is exit load charged on a switch?
3. 051A client holding 30 lakh in regular plans wants to move to direct plans. Walk me through the consequences.Costs, plans and commissionsIntermediatecase studyDistribution and salesWealth and advisory

   Say this

   It is a redemption and a fresh purchase, so it triggers capital gains tax and possibly exit load, even though the scheme and the portfolio are identical. The right answer is almost never to switch everything at once — it is to stop fresh flows into regular, and move the existing corpus in tax-aware tranches.

   Then walk it

   1. The switch is two transactions. Units in the regular plan are redeemed at NAV, gains are taxable, and the proceeds buy direct plan units at that plan's NAV. There is no tax-free plan conversion in India.
   2. Cost of doing it badly: suppose 30 lakh includes 10 lakh of long-term equity gains. At 12.5 percent above the 1.25 lakh exemption that is about 1.1 lakh of tax paid today. The annual saving from 1 percent lower TER is about 30,000 rupees, so you are roughly three to four years to break even.
   3. So sequence it. First, redirect all new SIPs and lump sums into the direct plan — that is free. Second, switch the units that are already long-term and sitting on small gains. Third, use the annual 1.25 lakh exemption each year to move a tranche tax-free.
   4. Check exit load before each tranche. Anything bought in the last twelve months in an equity fund will pay 1 percent, which usually makes waiting the better choice.
   5. Then the thing nobody mentions: the moment he goes direct, the distributor relationship ends. If that distributor was the reason he stayed invested through 2020, the 1 percent was cheap. Ask what the distributor has actually been doing before advising the switch.
   6. And if he does want advice, point him at a flat-fee registered investment adviser who works in direct plans. The cost becomes visible and separable, which is the honest version of what he is trying to achieve.

   Where candidates lose it

   Treating the switch as a free administrative change. It is a taxable redemption. The candidate who quantifies the break-even in years, and who asks what the distributor was providing before removing them, is giving advice rather than reciting a cost comparison.

   Expect next

   • How would you use the annual exemption to phase it?
   • What if the holdings are in ELSS?
   • When would you tell him to stay in regular plans?

Firm tags come from public, anonymous candidate reports on Wall Street Oasis: strong signal, not sworn testimony. Firms are named as the places a question was reported, not as partners of Fin Maverick. Answers are written for this page to show how to think out loud; they are not scripts to recite.