Amit Kukreja, Founder, WealthBeing Advisors shares his experience of being a SEBI registered Investment Adviser (RIA).
What preparation did you do to register with SEBI as RIA?
Since I had the work experience and educational qualification, for me it was just filling up application, following guidelines and sending SEBI the papers.
Is the process of registering complex? If yes, what difficulties did you face?
I don’t think so. Like I said, for me it was just a matter of putting together all the required documents in an organized way and sending them to the SEBI office. Any follow up query from SEBI needs to be addressed methodically. I did not face any difficulty though SEBI took a long time to approve my application.
What ambiguities/roadblocks did you come across in SEBIs Investment Adviser Regulations?
Educational and experiential qualification should be clarified further. Since I do not have execution/product distribution support, there were no roadblocks for me.
SEBI has announced 400% hike in registration fee for LLPs, firms and corporates. Do you think the increase in fee would deter IFAs to register with SEBI?
Absolutely, it will deter IFAs to register! At the same time it will make only serious players enter this business who have solid business plans to stay in the business for the long term.
What are the benefits of registering with SEBI as RIA?
It helps build trust and credibility of an IFA. It also gives customers power to take an action against an IFA if he/she has done something unethical in dealing with his/her clients.
Financial advisors can continue to charge fee (for making plans, account maintenance etc.) and earn trail fee even if they don't register with SEBI. Why should one register with SEBI?
SEBI regulation clearly states that IFA cannot charge a fee for advice rendered if not registered with SEBI. For those who are not registered, their advisory business is at risk.
What are your views on the cost of compliance with SEBI's RIA rules?
I
don’t have a view on this as I have not incurred any cost yet for compliance.
But I foresee a good operational expenditure being incurred on this activity
every year by the advisor firm/individuals.
Only 156 have registered as RIAs so far.
Why is a majority of IFAs not registering with SEBI?
The major reason I feel is the fear of losing execution/distribution revenue/business. In our country financial advisors have predominantly been advising and selling products. Their resistance to registration has been attributed to the sense of loss of revenue/commission stream arising from execution business. If that area is sorted out, more IFAs will register. I also feel IFA community has not taken SEBI regulation seriously. Many of them think they can get away with it and continue their business model. Some stern actions need to be taken by SEBI against those who have been charging for advice and doing execution as well without be registered. That should change the game.
SEBI's RIA rules require IAs to have Rs. 25 lakh net worth. What are your views on capital adequacy requirement?
In my opinion, it’s one an entry barrier by SEBI to keep non-serious players from registering with them.
What would be your advice to IFAs who are considering registering with SEBI as RIA?
Do it only if you are serious about pursuing this career/business for a long term. Don’t waste time in checking it out. Financial advisory is a practice that takes lot of time, patience and energy to build. There will be disappointment and frustration, but once built there is no looking back because our country has a huge void of trusted advisors. Like there is no over supply of doctors, there will never be over supply of IFAs in our country. A committed advisor can easily maintain few hundred clients every year with his support team for decades. One should be clear about the kind of business model he wants to operate in, for his financial advisory business.
