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MF News ‘There are growing number of investors who wants to pay fees for financial advice’

‘There are growing number of investors who wants to pay fees for financial advice’

In an e-mail interview, Vipin Khandelwal, a SEBI registered investment adviser and founder of Unovest, talks about his journey as an RIA.
Padmaja Choudhury Nov 14, 2017

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.

 

 

8 Comments
BAJRANGI CHAUBEY · 1 week ago
I think the comment will be quite opposite to it if he moves towards rural where people do not know what mutual fund is? So I would like to request such people to think about advisors moving to areas where mutual fund is not known.They move towards LIC and bank deposits by hearing market risks and advisory fee.
Prashant · 1 week ago
Well well....this is because of bombarding of false information that it is better and cheaper which is malicious in nature because both are untrue completely. Even RIAs missell which has been proven in no time of RIA regulation and licensing and then canceling the licences. Also the investors will have to keep track and keep calling RIAs for reviews and updates. All these regulations and rules are just and just to increase profits of AMCs. Shame shame shame
Harsh Bangad · 1 week ago
Working under RIA model and speaking positive about sounds good when someone is sitting in Tier 1 or Tier 2 cities. My sincere request to all RIAs and infact SEBI managers to implement such model in Tier 3 and Tier 4 cities. Anyone who succeed in taking fees for advisory from small city or town. I beg I will quit my profession.
This is nothing but a nexus between AMIF/SEBI and AMC to abolish IFA community and increase penetration of Direct Investors.
Ranjan Dutta Gupta · 1 week ago
The first thing SEBI should do is eliminate the word that Mutual fund investment is subject to market risk.It is a matter of regret that this kind of alert message does not apply to Insurance Industry when they are also investing in the market. EPFO is also investing in the market through ETF but there Govt is not warning that investment in EFPO is subject to market risk.
Further it is wrong information that investors are now willing to pay fees for the service of advisors . One should not go and believe these gossips May be in utter rural areas if one advisors ask for fees they may willing to give as they are absolutely unknown to Mutual fund. But in cities getting a fee is hardly possible.
Shubham marwaha · 1 week ago
Sebi should not implent these kind of things. RIA are not the future of mutual fund industry. THese are the mutual fund distibutors who have brought mutual fund industry at this level. Distibutors should be respected and regarded.
Praveen · 1 week ago
Hello everyone ,
SEBI RIA is viable and logical for T15 cities
In B15 cities SEBI RIA is just unviable, investors will never pay fees for your services till the time this differentiation of T15 and B15 will be removed in future , Napur city has AAUM as 9000+ Cr today which is a T15 city with last ranking ,

The highest AAUM of B15 city like Varansi has 4800 Cr today, the gap is of just double ,

I believe it will take at least 3 to 5 years for Varanasi to achieve AUM of Nagpur which is today at close to 10000,

Till the time let T15 follow SEBI RiA for. Next 3 to 5 ,

When B15 incentive will be removed and stopped completely by 2020 and 2022 then SEBI RIA will be accepted at full-fledged level.

If you look at basic demographics and educational qualification of MFD today , a tough job for them to accept SEBI RIA model.

On the other hand new MFDs are young dynamic and educational qualification is good enough to accept the SEBI RIA , let them be the guiding light .

Today only 2 crore individual has mutual fund investment out of 130 crore Indian population means 1.538 % penetration today , A long journey is still left.

700 RIA out of 100000 plus MFD means .7 % means 99.3 person left.

It will take 20 years to flip it to become America or Japan or Europe .

SEBI official sits in AC cabins, day in day out
Meeting with foreign delegates and studying global standard for FINANCIAL investment and advisory .

They don't have idea that a single 2000 or 5000 SIp from an investors takes hell lot of efforts and time to close it.


All in all thanks to Demonetization and GST for helping MFD to generate huge business in last 1 year.
Praveen · 1 week ago
Hello everyone ,
SEBI RIA is viable and logical for T15 cities
In B15 cities SEBI RIA is just unviable, investors will never pay fees for your services till the time this differentiation of T15 and B15 will be removed in future , Napur city has AAUM as 9000+ Cr today which is a T15 city with last ranking ,

The highest AAUM of B15 city like Varansi has 4800 Cr today, the gap is of just double ,

I believe it will take at least 3 to 5 years for Varanasi to achieve AUM of Nagpur which is today at close to 10000,

Till the time let T15 follow SEBI RiA for. Next 3 to 5 ,

When B15 incentive will be removed and stopped completely by 2020 and 2022 then SEBI RIA will be accepted at full-fledged level.

If you look at basic demographics and educational qualification of MFD today , a tough job for them to accept SEBI RIA model.

On the other hand new MFDs are young dynamic and educational qualification is good enough to accept the SEBI RIA , let them be the guiding light .

Today only 2 crore individual has mutual fund investment out of 130 crore Indian population means 1.538 % penetration today , A long journey is still left.

700 RIA out of 100000 plus MFD means .7 % means 99.3 person left.

It will take 20 years to flip it to become America or Japan or Europe .

SEBI official sits in AC cabins, day in day out
Meeting with foreign delegates and studying global standard for FINANCIAL investment and advisory .

They don't have idea that a single 2000 or 5000 SIp from an investors takes hell lot of efforts and time to close it.


All in all thanks to Demonetization and GST for helping MFD to generate huge business in last 1 year.
Sanjay · 1 week ago
What are the RIA ,full detail of Exm.
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