Even as the covid-19 pandemic posed a huge challenge for the MF industry and SEBI tightened the norms for doing advisory business, 15 individual RIAs have applied with SEBI to start their advisory business during the lockdown quarter.
SEBI website shows 32 applicants have sought permission from the regulator to start their MF advisory business. Of this, 15 are individual RIAs while the rest 17 are institutional RIA players. Last financial year i.e. in FY 2018-19, there were 153 applicants to become RIA and 75 of them had applied to become individual RIA.
In fact, on a year-on-year basis comparison, more advisors have applied to start their advisory business in Apr-Jun this year as against the corresponding period last year. In Apr-Jun 2019, only 7 players had applied to get the RIA license.
This has come even as the market regulator has been tightened compliance the norms to practice advisory business. SEBI has said that individual RIAs cannot offer both advisory and execution services to their clients. This is a challenge for many individual RIAs as many have been carrying out both advisory and distribution activities under one roof often through a family member.
Also, it is likely that SEBI will ask RIAs to either charge a fixed or a percentage fee based on the quantum of assets under advice. Now most advisors charge their clients a bit of both.
Further, SEBI has said that individual RIAs must have a net-worth of Rs 5 lakh, up from Rs 1 lakh earlier. And if any individual advisors has more than 150 clients, they will have to get registered as ‘non-individual advisors.’ This means such advisors will have to have at least Rs 50 lakh net worth to continue advisory business.
