Interviews ‘Just go for RIA. There is no alternative if you want to grow’

‘Just go for RIA. There is no alternative if you want to grow’

Continuing with our series on RIAs, Yogin Sabnis, Founder of VSK Financial Consultancy shares his experience of being an RIA.
Banali Banerjee Nov 19, 2016

What preparation did you do to register with SEBI as RIA?

All we had to do was to submit the papers as required by SEBI. For example, they had asked for a business plan. So we wrote exactly what we had planned to do to take our business forward keeping in mind the regulatory requirements of SEBI. We also attached all the supporting forms and formats which we said we would be using in the business plan. 

Is the process of registering complex? If yes, what difficulties did you face?

Not really. The only complaint I had was that it took a lot of time (4 months) from the date of submission to the date of granting of certificate.

What ambiguities/roadblocks did you come across in SEBIs Investment Adviser Regulations?

There are no road blocks but to many of us it is a complete change in the way we advise. Also,  the way we maintain documentation changes. I am assuming that all those who seek RIA registration are concerned for their clients and intend to do the right thing by them, but now that intent has to be clearly seen on paper which means a lot of extra work. There is some level of ambiguity in the manner in which this record keeping is sought but I expect with the passage of time, SEBI will keep coming with clarifications and some sort of system will appear.

What are the benefits of registering with SEBI as RIA?

If you are genuinely working with the client interest at heart, then this is one way of actually demonstrating that intent. Secondly, on becoming an RIA, you will adhere to all the compliance requirements which automatically makes your processes disciplined and your work becomes professional.

What are your views on the cost of compliance with SEBI’s RIA rules?

Definitely, there will be a significant cost to it but it has to be simply added in your budget.

Is it feasible to sustain an RIA model only by charging fee?

This question haunts a lot of IFAs because they may have faced resistance or reluctance of fee payment from their clients. Obviously prospects have to be educated on the benefits of availing the services of RIAs and the need to pay professional fees. But the important point to remember is that these people need advice for sure (and this need is going to be increasingly felt), and today they are not willing to pay fees because they feel they have alternatives in the form of other intermediaries who will advise them free of cost. When everyone starts charging then they will have to choose someone not on basis of fees but on the basis of competence. So I feel it is only a matter of time for people to start accepting the fee model.

What would be your advice to IFAs who are considering registering with SEBI as RIA?

Just go for it. There is no alternative if you want to grow.


DV Suresh · 7 months ago
Good one Sabnis. Yes it's a matter of time that there will be more IFAs registering as RIAs. The resistance is not because procedures have to be followed, but lack of clarity on approaches, especially for those who have been very successful IFAs with over a decade of experience and with reputation, giving good advise and also distributing financial products which have to go together.
Sunil Bhagat · 7 months ago
The Ria will speak for their community as they want to increase their businesses. But are they able to financially sustain only on ria business. I have serious doubts. Infact maybe a slightly stronger regulation on the IFAs along with a slight reductions in TER will work well. The Ria certification should be given to all IFAs but as such the fee collection should be out of the system. Rather the Rias should come back as IFAs.
Lingaraju M H · 7 months ago
I some what agree with Mr. Sunil Bhagat. No model of MF business can be a holy cow. So what is the problem with IFA model?
Lingaraju M H · 7 months ago
I simply can't understand what is the pressing need to change the rules of the game.
IFA model is under continuous scrutiny since 5-6 years and has rather become very reformed and efficient. Results are evident in growing AUMs of AMCs. Strangely no one is explicitly saying what if an IFA doesn't want the Advisor tag but continues to only distribute MF? Will he make money or not? Why can't an IFA be allowed to acquire necessary certificates & continue business as usual?
What's there to assure that RIA is the absolute solution of even non existing problems?
Can't help believing that IFAs are unfairly targeted.
Rashmikant K Ashani · 7 months ago
How meekly people submit to unfair demands, bright example
Jitesh Babel · 7 months ago
RIA model for many IFA without any distribution backend will be unviable business proposition.

Costs for an IFA / RIA new to business:
office rent - appx rs 7000 pm
Office boy admin etc - rs 7000 pm
Electricity, travel, parking, repairs etc - rs 5000pm.
So, appx rs 25 k per month. Add, minimum expenses of rs 20k on self. So around 30k to 40kshould be monthly income to survive. Annually rs 4 lacs.
So new ria has to have that much paying clients say 2-3 years into business or its better to take a bank job.

Do not know if the fee paying clients will be able to shell out that much (around 200 clients averaging Rs 2500 per annum fee) whereas a 5 cr portfolio in 3 years with 80 paise trail is very much likely.

As per existing set of RIA maximum I know have a distribution business also wherein they have commission income also coming from funds distribution. So they charge very nominal fee like 1000 per annum ( many online portals like arthayantra work that way)

RIA as education and process driven consulting is fine but as a business model seems a failure
Ganesh Kumar Gupta · 7 months ago
This is will be the result if commission is opened up by SEBI through hitherto unsuccessful RIA route
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