Even after five years, SEBI registration of investment advisory is yet to pick up. SEBI’s latest data shows that the total number of SEBI RIAs was 918 as on May 2018.
Of the total 918 RIAs, over half of them are individuals.
While the industry has added 341 new SEBI RIAs in FY 2017-18, AMFI data shows that over 20,000 new MF distributors joined the industry during that period. Experts attribute this lukewarm response to lack of clarity on RIA regulations due to series of three consultation papers floated by SEBI.
“SEBI’s consultation paper is not clear. Few distributors genuinely want to become fee-only financial planners but given the uncertainty many distributors are hesitating,” said Suresh Sadagopan of Ladder7 Financial Advisories.
Kavitha Menon of Probitus Wealth believes that non-viability of the fee-only model deters many distributors to register as RIAs. “If the distributor is receiving healthy commission then there is little incentive for a distributor to become an RIA. RIA model requires high cost of compliance and attracts overhead expenses,” said Kavitha.
Another reason for this resistance is challenges in charging a fee from clients. “Many of my clients have been with me for years and I think they would not be comfortable if I charge fee for advice. Unless it is mandatory, I am more than happy to continue as mutual fund distributor,” said Nisreen Mamaji of MoneyWorks Financial Advisors.
SEBI data shows that many corporates and fintech companies are becoming RIAs. “One can see a lot of traction from fintech companies and equity research firms. In addition, some corporates who have not registered as RIAs are doing so to become compliant. However, the model is still not attractive for individuals,” said Rohit Shah, CEO, GettingYouRich.com.
Seconding Rohit, Suresh said, “The internet penetration in the country has increased. Many fintech companies feel that this is the right time to enter the online advisory model. Many of them recommend direct plans to their clients.”
