What preparation did you do to register with SEBI as RIA?
I first cleared the NISM certification exam, which is mandatory to obtain RIA license from SEBI. Clearing the certification programs is important and documentation follows that.
Why do you think that Indian investors are mature enough to pay fee for financial advice?
We are yet to reach a level where every investor is willing to pay fees for advisory services. Nevertheless, in the last few years, we have seen an increase in inclination among investors to pay fees for financial advice.
Is the process of registering complex? If yes, what difficulties did you face?
I did not have any prior experience in distribution. It was relatively easier for me to start. The certificate came in just two months.
The process is not complex if the required documents are in place and you have provided all the details to SEBI.
What ambiguities/roadblocks did you come across in SEBIs Investment Adviser Regulations?
As an individual RIA, I feel that there is a restriction on providing execution services. SEBI should clearly state that an individual RIA can provide services if it is not commission oriented or does not involve any payment from the manufacturer for selling the product.
What are the benefits of registering with SEBI as RIA?
Greater recognition and credibility are the two main benefits of registering with SEBI as RIA. Not to mention that we are setting ourselves on the path of the future – fee based advice.
Financial advisors can continue to charge fee (for making plans, account maintenance etc.) and earn trail fee even if they don't register with SEBI. Why should one register with SEBI?
I believe this is an anomaly and SEBI is set to correct it in the coming days. It is just a matter of time. Soon, there will be clear distinction between a distributor of products and an advisor.
What are your views on the cost of compliance with SEBI's RIA rules?
One needs to follow rules, if one wants to enjoy the benefits of being an RIA. The good, bad or ugly of the rules is a separate issue. Prima facie, everyone should follow the rules.
Next, rules instil a sense of discipline in the way IAs function. They establish a clear set of expectations between the client, advisor and SEBI.
Initially, it takes effort to get the process set and running. The costs are not humongous in my view. I do not think that compliance cost will be a problem to someone who is committed to the profession.
Only 700 have registered as RIAs so far. What are the reasons for a majority of IFAs to not register with SEBI?
They are having the easy way out so far. As I mentioned earlier, it is just a matter of time.
However, RIA model will pick up once SEBI clarifies norms on execution services.
SEBI's RIA rules require RIAs to have Rs.25 lakh net worth. What are your views on capital adequacy requirement?
That is for LLPs and companies. I find it high. If a CA or a CS need not have a net worth requirement to start their practice, why should RIAs be subjected to it? It should be more reasonable – maybe less than Rs. 10 lakh.
What would be your advice to IFAs who are considering registering with SEBI as RIA?
IFAs should go for it. This is the future of financial advice. Clients will pay fees once they realize that you have been adding value to them.
However, there is some ambiguity in terms of costs and compliance. The biggest issue is charging a fee from the client.
