Suresh Sadagopan of Ladder7, Mumbai feels that it is unaffordable for small corporates such as his with just 4 to 5 employees to appoint a compliance officer. He is also skeptical of the fact that whether a CA will understand the regulation and carry out his audit accordingly. “I welcome the advisory regulations but there are few fine prints that will act as a hurdle for the growth of the advisory industry in India. Firstly, compliance and audit will only increase our costs. Already financial advisors are struggling to survive in the industry… on top of that additional cost will deter most of the new comers from entering the field,” said Suresh.
According to SEBI regulations, advisors who have a partnership firm or are a body corporate need to appoint a compliance officer. The advisor also has to appoint a CA to conduct a yearly audit in respect of compliance with these regulations.
He also feels that qualification and certification will be deterrents. “The qualifications issued by SEBI are stringent and it will close doors for many distributors. This will deter many of the fresh CFP candidates to pursue investment advisory because they lack 5 years of experience stipulated for the investment advisory business. Moreover, investment advisers seeking registration under these regulations have to ensure that their partners and representatives obtain certain certification within two years from the date of commencement of these regulations,” explains Suresh.
Gajendra Kothari of Etica, Mumbai feels that in India it is difficult to survive only on client’s remuneration. He echoes Suresh’s views on networth requirements and additional costs on compliance and audit. “Besides net worth, you also need to appoint a compliance officer and auditor. These things are only increasing our cost without any benefit. So, after being an advisor only my cost increases and you are skeptical about the remuneration that will come your way. So, it is better for most distributors to remain a distributor and get remuneration from AMCs. The regulations will only benefit big distributors who have an AUM of Rs 100 crore,” said Gajendra.
Dhruv Mehta of FIFA shares that the distributor now needs to decide the business model he wants to adopt. A drawback he points out is that while corporates and NBFCs are allowed two separate companies (one for advisory and one for distribution) this does not apply to individuals.
He feels that only 5 to 10 percent will convert into advisors. “Overall, it is a positive regulation because it will help the advisors to get a recognition which was lacking till date in India. And I also feel that the qualification and certification will make sure that only quality people remain in the industry,” said Dhruv.
Sumeet Vaid of Ffreedom Financial Planners is very excited with the new regulation. “We are looking forward to getting ourselves registered as Investment Advisers. Investment Advisers can only earn by charging clients so we will see more serious players remaining in the industry. We feel more advisors should take up this model because that is the future. But we do not see the number of advisors increasing in India because people are satisfied with the remuneration from AMCs. So, we at Ffreedom are looking forward to joining hands with many more partners who want to be a part of pure advisory model,” said Sumeet.
