Individual distributors are of the view that SEBI’s latest move in which it has asked individual mutual fund distributors not to use nomenclature like ‘independent financial advisers’ (IFAs) and ‘wealth managers’ without registering with SEBI as RIA will have no impact on them.
Amit Bivalkar of Sapient Wealth believes that investors would continue to trust their mutual fund distributors irrespective of nomenclature. “Investors are associated with persons and not his nomenclature.”
Neelesh Shah, President KAMFA seconds Amit’s view and says that many people do not understand the difference between distributors and RIAs. “In my view, there will be no impact of this move as many investors don’t understand the nitty gritty of fee based service and mutual fund distribution.”
Milind Shah of ArthMitra Gurukulam welcomes the move and says that SEBI has clearly segregated the role of distributors and advisors. “This is a much awaited clarification from SEBI. With this, many distributors can decide if they want to become RIAs or continue to offer regular plans through mutual fund distribution.”
An RIA requesting anonymity said that while SEBI has asked mutual fund distributors not to use nomenclature like IFAs, the market SEBI cannot prevent insurance agents from using nomenclatures like life advisors or financial advisors. “Implementation will be challenging for SEBI as there are 20 lakh life insurance agents who will continue to use such a nomenclature.”
On other guidelines associated with RIAs, she said that the introduction of upper limit on fee would not be viable for RIAs. “By putting cap the fees, SEBI is limiting business growth of RIAs. Also, the suggested upper limit of Rs.75,000 is not viable for distributors at all. In my view, let the market and competition decide what the right fee for financial advice is.”
Seconding her view, Suresh Sadagopan of Ladder7 Wealth Advisories says that many distributors would surrender their license if the market regulator caps advisory fees of RIAs. He also said that putting eligibility criteria to become RIAs might also deter new comers to take up fee based advisory. “While the market regulator has exempted existing RIAs through grandfathering, the new distributors opting for RIAs may find it difficult to comply with SEBI norms on networth requirement, educational qualification and so on. It would eventually affect the entire RIA community as a whole.”
Sadagopan further said that other decisions of the market regulator like segregation distribution and advisory activities of corporate RIAs, extending execution services in direct plans to individual RIAs, putting in place agreement to engage with clients and giving clarity on in payment of fees are some big positives for the investment advisors.
