Four years after SEBI asked financial planners to either take up the responsibility of an advisor or distributor; only 385 have registered as individual RIAs.
As on April 2017, there are 634 RIAs in the country. Of these, 249 are corporates. There were only 200 RIAs – 100 individuals and 100 corporates – in February 2015. Cafemutual counted private and public limited companies, and limited liability partnerships, as corporate entities and advisory companies and proprietorship firms as individual RIAs.
Experts attribute this muted response to SEBI RIA regulation to unviability of the fee-only model.
“Many individuals do not want to leave the comfort of commissions that they receive from AMCs. Moreover, some of them are not confidentif the fee-based model would work for them,” says Suresh Sadagopan of Ladder7 Financial Advisories.
Further, the small ticket size of their client base deters distributors from registering as RIAs.“How can a person having an SIP of Rs5,000 pay an annual fee of Rs15,000. It works well if the ticket size is large,” says a Mumbai-based advisor requesting anonymity.
A few experts, though, believe the fee-based model will pick up. “More people will register as RIAs once SEBI modifies the existing guidelines. In addition, if the market regulator allows RIAs to tie up with mutual fund distributors, it would help both the channels to grow and sustain,” says LovaiiNavlakhi of International Money Matters.
SEBI’s focus on rationalising total expense ratio (TER) and commissions are also clearing the path for many individuals to become RIAs.“SEBI has been focusing on improving disclosure standards and rationalising the commission structure of MF distribution. This has led many IFAs to change their business model,” saysAmit Kukreja, SEBI-registered fee-only advisor and founder of amitkukreja.com.
There are a few advisors, however,who do not believe in registering with SEBI as RIA. Vinod Jain, of Jain Investments, believes that advisors should become RIAs only when demand picks up. “If our clients think that it is necessary to take up the role of an RIA, then we would definitely become one,” says Vinod.