SEBI has registered 194 new RIAs in the past one year. As a result, the number of total RIAs stood at 697 as on August 2017, shows data from SEBI bulletin.
Interestingly, a majority of these new RIAs - 152 have registered with SEBI in the current calendar.
In October 2016, SEBI had come out with the first consultation paper in which it had proposed segregation of distribution activities and advisory model.
In contrast, AMFI data shows that the mutual fund industry has added over 8000 new distributors between January and August 2017.
We spoke to a few RIAs to understand the reasons for low registrations. They believe that many distributors do not find the fee-only model economically viable. “Distributors earn commissions every month which does not exist in fee-based model,” says Suresh Sadagopan of Ladder7 Financial Advisories.
Another reason behind the muted growth of RIAs is convincing existing clients to pay fees for advisory services.
Chennai-based RIA Shyam Sekhar of ithought Financial Consulting believes that implementation of fee-only model in India is ahead of its time. He says, “Many investors do not want to pay fees for the investment advice. Unless there is a change in society’s behaviour towards financial advice, fee-only financial advisors will not be able to thrive in this industry. Moreover, there is limited incentive for professionals to switch from the distribution model to the advisory model,” says Shyam.
However, a few RIAs have a different view. Mumbai-based RIA Prakash Praharaj of Max Secure Financial Planners says that the ability to command a price for the financial advice is an incentive for most RIAs. “In my view, the fee-based advisory model is sustainable for RIAs due to pricing power,” says Prakash.
