MF News ‘Call yourself IFA or wealth manager only if you are a SEBI registered RIA’

‘Call yourself IFA or wealth manager only if you are a SEBI registered RIA’

Here are the key highlights of SEBI’s consultation paper on SEBI (Investment Advisers) Regulations, 2013.

Nishant Patnaik Oct 8, 2016

SEBI has come out with a consultation paper which proposes a host of amendments to SEBI (Investment Advisers) Regulations 2013.

Here are the key proposals of the consultation paper:

On exemption provided to mutual fund distributors

SEBI proposes to do away with the exemption given to mutual fund advisers in which they are allowed to charge a fee for mutual fund advisory services apart from commission income.
No one can use nomenclature like ‘independent financial advisers’ (IFAs) and ‘wealth managers’ without registering with SEBI as RIA.
Individuals who opt to continue with the current model of commission can use the nomenclature ‘mutual fund distributor’. Such mutual fund distributor cannot recommend any product or give any advice; they can describe product specification
The silver lining is that distributors who opt for RIAs can continue to get trail commissions on existing AUM. However, they have to disclose this to their clients.
RIAs cannot accept fee in cash - only cheque, draft, NEFT, RTGS, IMPS etc.
RIAs registered under individual category cannot provide execution services
Client or adviser can terminate business relationship by serving a one-month notice. However, if a client is not satisfied with the services, they can end it at any point of time subject to refund of the proportionate advisory fee.

On exemptions given to other professionals

The market regulator has proposed to put professionals like stock brokers, portfolio managers, chartered accountants and company secretaries under the purview of Investment Adviser regulations. That means, these professionals will also have to get themselves registered with SEBI to give even an investment advice incidental to their profession.
Exemption will be given to merchant bankers, agents (only for insurance advice) and retirement advisers (only for retirement advice) subject to advice related to the products regulated by their respective regulations.

Advice through subsidiary

RBI has proposed that banks and NBFCs will have to float a separate department or divisions to provide advisory services. Such entities may now have to float a separate subsidiary to provide investment advice.
Banks or other such firms cannot force their customers to avail execution services from them.

Other key proposals

Persons providing investment advice through any broadcasting or telecommunication media will have to comply with RIA regulations.
No one can provide trading tips via WhasApp, SMS, WeChat, Twitter, Facebook etc. unless such persons obtain RIA license.
Carrying out risk profiling of corporate and institutional investors is not mandatory unless it is related to complex products like derivatives, structured products etc.
CFAs, CFPs, CWMs, Wealth Management Certification (Advance Level) by CIEL and International Certificate in Wealth & Investment Management by Charted Institute for Securities and Investment have been proposed to be exempted to appear NISM exam to obtain RIA license.

SEBI has given a time frame of three years to comply with the guidelines once it gets finalized.

The market regulator has invited comments from public before November 4, 2016. You can email your feedback to sebiria@sebi.gov.in or send it by post to Naveen Sharma, Deputy General Manager, Investment Management Department, SEBI, SEBI Bhavan, Plot No. C4-A, G Block, BKC, Mumbai – 400051.

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24 Comments

Sanjana Sharma · 7 years ago `

Good regulations....and this will bring more professionalism to the financial world....coz ....banking officials....were doing away with all the code of conduct....being new to the field. .and just beginning my career ...m happy with the news ...atleast now qualitative cfp will emerge in the market ????

Rajni M Shah · 7 years ago `

I hold a different view. To term IFA as Wealth Manager will be fallacious. Role of Advisor per se is advisory in nature. Term Manager is embracive : Planning, Motivation, Coordination, Control with organisation at the centre stage. This is why I always recommend to provide management orientation for IFA as professionals. Product and Technology expertise is just not enough in a competitive market space. Prof. Rajni M Shah

Prashant Shah · 7 years ago `

The banks are so smart that they will just form a company which will advise and pass on the data to the bank for the execution and earn the commission. So they will charge fees and earn the commission also. Why this facility available to On what grounds will SEBI appoint RIAs? Who Is an adviser to SEBI? SEBI and AMFI are hand in gloves to destroy the distributor community. Even if distributor has a knowledge on advising, why should SEBI stop anyone from giving it? If someone does not want to give fees for advise and want distributor to give advise, why should they be forced to pay fees to any third person who they do not know where as the distributor they know has no value. They mean that distributor should be looked down upon. Also the cost of the financial product which they say should go down will actually go up. How do they justify that?

Rajesh diwan · 7 years ago `

I don't agree with you. You are killing this profession. There are senior citizens or lower middle class IFA who earn their living by selling mutual funds. And now bringing this Registration as RIA. You will eliminate this profession and lot of people will leave this profession and look for another way of earning for their living.
Plz it's not worth it
As all of them whoever is recommending are all AMFI certified.

Request you to STOP THIS RIA STUFF.

REGARDS.

MR. DIWAN

G Chandra kumar · 7 years ago

I Agree with Mr.Diwan's view. There is lot issues is there to be taken for improvements of our Industry,but i don't know why peoples are concentrate this issue.First of all control the Banking channels for miss selling,Secondly Introduce same procedure for all AMC's in common application forms,Common claim procedure,Change of Bank, change of address,SIP,STP Registration etc..etc....Why they introduce NACH form for SIP? For faster sip Registration, but now sip Registration is very delay.What is the use of NACH?Some Banks are charging for NACH Registration?Is NACH introduced for the Benefit BANKS or Clients? Like this lot of issues is there. First come & sit with IFA's and know the problems he/she is facing then only our Industry will Grow like other country.

nandu · 7 years ago `

Itlooks like till uk sinhasinha retires in mar 17 a term like ifa mutual fund distributor will be non existent in financial market. Only direct plans will exist regular nav will be thing of past.... All ifa existg will take jobs in AMC like me......bravo sinha

Prashant · 7 years ago `

Why should we have to pay to SEBI and AMFI both? SEBI should dissolve AMFI because there should be no need to take any certificate from AMFI once SEBI appoints someone as RIA. Also why would RIA recommend a plan which will not be a direct plan but a regular plan? This is a clear sign that SEBI hand in gloves with AMFI wants to do away with commissions and wants AMCs to earn extra by saving it and increase TER later on. Why our opinion not sought before bringing these draconian rules? Although we lose the most, we are never asked for any matter. We should unite and take them head on. We should not just sit but unite at any cost. Does SEBI ask mukesh ambani that if he wants to do business in oil than he needs to have a degree in oil otherwise he cannot sell? Have they ever questioned united breweries or ITC that they can not sell their products because they can kill. That is fine with them but we selling a product we know and understand is not ok with them. Do liquor or cigerette or even medicine selling companies have any ethics? But that will be fine with them. Why?

P · 7 years ago `

Sorry it is united spirits and not united breweries. They don't stop them because people who drink know that what they are drinking can kill. The same way people know if they buy a product what the product is all about. Unless SEBI thinks that Indian people are dumb and don't understand anything.

Palas Kumar Chatterjee · 7 years ago `

Can not understand who is actually going to be benefited with this guidelines. Commission disclosure norms invite a multiple problems in the field of financial management. I personally think that Indian retail investors are not so smart that they can actually choose a good product for themselves. If they can why the norms of certification exists.why a mutual fund distributor needs to be certified before selling mutual fund. If an individual can buy or sell without doing much exercise then to do certification is a hoax.it is of no value and for this each year NISM earns from distributors in the name of certification or renewal of licence. Secondly regarding disclosure of commission. wherever we buy any product do we get the bifurcated bill of the every end's commission.if such rules are exercised can a shopkeeper sell the product .SEBI may come with a disclosure that aims to reduce the commission structure after a certain period of time.Actually the distributors helps the financial markets a lot by keeping the investors invested in the market for a long time otherwise the investors will take frequent decision to buy and sell.No one will have the patience to stay long in the market. Sure to have a wrong effect.Is there no legal way to challenge such one sided regulation.What our DISTRIBUTOR ASSOCIATIONS think ?

devendra · 7 years ago `

sebi is putting the last nail in the coffin of IFA's carreer with hand in glove with top amcs. the transparance of everything is mascaraded in this final nail. it;s dogmatic stance will throw many people out of their earning so that systematically the society is divided between haves and have nots. professionalism is meant for few HNI'S clients and 90 % of people eke their livelhood with little savings and making their both ends meet. the decisions of sebi since past few years are very rigid and does not mitigate and inflated price rise of standard of life. india is 35 to 40 years behind the western culture. our people need to take a cue of our history where the rulers were down to earth in understanding and elevating the life understanding. quite opposite is the stance of the rigid ,dogmatic, and unapproachable way of our onesided regulator. while irda is trying and having human face of the policies and improving, the market regulator is onesided and coming with iron hand on the fraternity as if there is no other business. amfi role is cut short due to self inflicted goal as their joining bigwigs of amcs. while those in power should strive for mitigating bringing equanimity in the standard of living in the society, the regulator is boxing with both fists in destroying the fraternity of the ifa. the world should open their eyes as what's happening the west, east of africa , and other countries the oppulance has left the society into vagabounds, unemployment, high standard of living, due to differences of haves and have not , lets give a middle path to our rich culture, tradition, dharma, and the sarvejana sukinobhavanthu as prescibed in the bhagavath gita a propondour of the standard of human life-sadbhavana

Prashant · 7 years ago `

How do anybody buy from an advisor? Also banks will form other advisory company and pass on the leads to banks because banks know how much money is in bank accounts. But that misspelling will be allowed. Where as IFAs genuinely find out goals and risk profile and accordingly sell a product. Also In AMC office people who advise or sell products of their own AMC, what registration will that person need?

Sonu · 7 years ago `

Already started looking out for another Industry. MF Industry is gonna doe its own death.

All the best to guys staying back in this industry.

I choose not to work for a bunch of fools.

amit · 7 years ago `

Waited too long for these changes. Personally, waiting for these changes since Feb 2008 (the month in which I completed my CFP)

Santosh Hegde · 7 years ago `

Three years is very long time. ...anything can happen. Why we worry now. It better to focus on business as we are doing now.

SUNIL JOSHI · 7 years ago `

What is SEBI trying to prove by imposing new rules and disclosures.100% of the financially illiterate people in India shy away from equity.the first impression they get in mind its risky we will loose money "when we talk about equity.its really need skill to convince such customers and SEBi is intruding here.before coming up with things like RIA and commission disclosers SEBI just need to take a deep breath and ask how much money is parked in bank FDs and how much in MF.if SEBi wants more retail participation in equity it should not kill distributors because of whom MF aim ,No. Of SIP registered are all time high.SEBI is super smart in disclosing 2-3% commission to distributors whereas IRDA it seems donot find appropriate disclosing commission up to 30-40% for insurance priducts.infact IRDA knows who actually runs thier business

Rajendran · 7 years ago `

What is the requirement to register as RIA and how much is the Fee, any idea on this ?

Dilip Shenoy · 7 years ago `

What is the % of population investing in Mutual Funds? On one hand we are promoting banking inclusion and on the other over-regulating the most already regulated and transparent industry in India today. Fin min is talking about making FD's as a thing of the past.. How many actually are aware of the merits of Bond funds forget equity MF's. Robo-advisers are dangerous just as was discovered by the recent 6% pound crash in minutes due to an algorithm.... There cannot be a one size that fits all.

Ghazali · 7 years ago `

SEBI is going to make India as America and Europe in over night

Jitesh Babel · 7 years ago `

Individuals who opt to continue with the current model of commission can use the nomenclature ‘mutual fund distributor’. Such mutual fund distributor cannot recommend any product or give any advice; they can describe product specification

One more sign on the form will do away this requirement completely.. raaste dekhoge toh nikal jayenge. do not fret over regulation.

Kuntharayil Abraham Thomas · 7 years ago `

I would like to mention here that in India no RIA can survive on the fees received from services rendered as you may be aware that here no one is interested to pay for mutual fund advice. The products need to push still in India and the awareness is too low about Mutual Fund products. Any decision taken should be well thought and should be supportive to the the Distributor community. Frequent changes in the regulation will discourage the marketing team!

vishnu · 7 years ago `

I Feel A Proper Representation Should Give Lot Of Answers To The Current Changes. Today I Feel Association Participation Is Working In Current Govt.

pinaki Kundu · 7 years ago `

Why implementing regulation every week? I understand SEBI is confident enough about the future of MF industry without Distributors. I advice SEBI to implement one rule and eliminate all distributors on a single day and end this circus show. I advice all MF distributor community to switch to some other profession immediately. A true sales man can sell any product. It is the manufacturer who will decide whether he will take sales person to promote his product or not.

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