The SEBI concept paper proposes that distributors will have to make a choice of being a Financial Advisor or an Agent. Here are the decisions that you will have to take if these proposals take shape. Read and decide for yourself
First determine your eligibility - Do you meet any of these criteria?
1. Are you a CA?
2. Are you a MBA - Finance?
3. Do you have 10 years of relevant experience?
If not, you might have to settle with being an Agent.
If you meet the criteria, you can choose to become either a Financial Advisor or an Agent. Here are some of the things you would like to consider.
|
Parameter |
Financial Advisor |
Agent |
Decision point |
|
Business model |
Client centric |
Product centric |
What are you comfortable with? |
|
Client fee |
Yes |
No |
Can you charge your client a fee? |
|
Upfront commission |
No |
Yes |
|
|
Trail commission on existing AUM |
Doubtful |
Yes |
Are you ready to give up the annuity that you have built over the years? Will your future stream of client fees offset the loss of trail? |
|
Trail commission for fresh assets |
No |
Yes |
|
|
Compensation limit |
As negotiated with client |
As negotiated with AMC |
All put together, where can you make more money? |
|
Compliance requirements (Client risk profiling, fiduciary responsibility, Restriction on advertising and outsourcing) |
Extensive |
Nil |
Are you willing to commit time and resources? |
|
Documentation requirements |
Extensive. 5 year records to be made including audio recording of oral advice |
Nil |
Are you ready, willing and equipped to meet this requirement? |
|
Regulatory ambit |
SRO and respective product regulator |
Respective product regulator |
Are you willing to be subject to SRO? |
|
Pride and prestige |
Presumably higher |
Presumably lower |
|
If this were to become law today, what would be your decision? Please share with us.
Click here to Read: CONCEPT PAPER ON REGULATION OF INVESTMENT ADVISORS
