What preparation did you do to register with SEBI as RIA?
According to the recent RIA consultation paper, calling oneself an IFA or a Wealth Manager will not be allowed (without registering as RIA) after Oct 2019. When the SEBI RIA regulation was released in Jan 2013, we were very clear that we would need to register ourselves as SEBI RIA, since we have been charging fees to our clients since August 2009.
We are also an ISO 9001 (2015) registered company and hence, most of our processes, framework, guidelines and manuals were already in place. We just needed to device the structure and frame work to apply for SEBI RIA. Our board of directors were clear that we wanted continuity in our advisory practice and hence we decided to go with the corporate model for RIA registration.
Is the process of registering complex? If yes, what difficulties did you face?
There is net worth criteria, capital criteria, certification requirements and framework of structure that needs to be looked into which is different for individual RIAs and corporate RIAs. However, this issue is addressed in the latest SEBI consultation paper.
What ambiguities/roadblocks did you come across in SEBIs Investment Adviser Regulations?
There were initially issues on net worth criteria, capital infusion and infrastructure road blocks. Details on business model, future business growth and declarations were some of the discussions we had with SEBI. However, we had answered all queries and met all the criteria. We were able to get our license in September 2014.
SEBI is willing to help and address the queries of advisors wanting to become RIAs. I feel the roadblock or reluctance sometimes comes from the adviser’s unwillingness to adapt to change for the better.
What are the benefits of registering with SEBI as RIA?
Registering as SEBI RIA will increase the trust factor. Transparency in dealings is highlighted and expectations for both client and advisor are set at the outset at the time of client engagement.
For CFPs, ethics is a basic value they can provide in the advisory profession and is one of the strongest referral points. We have never had to make reference calls or do any cold calling from the day we started working since 90% of our new business comes through existing client referrals. For me, asking for referrals is a way of showing dilution in our service and quality of services rendered to existing clients. When we meet clients, we need to talk about them and not about how they can help us through referrals!
What are your views on the cost of compliance with SEBIs RIA rules?
Cost of compliance should form a part of the fixed cost of the organization and can be considered in calculating the fee charged from clients. It should be considered more as a check for internal guidelines and once a mechanism for compliance, record keeping advice and book keeping is in place, external compliance becomes just a formality since our internal records are up to date.
It is like paying service tax or updating professional tax with the IT department. There is no choice on this front and similarly compliance for RIAs should be part of the internal processing which happens on a continuous basis.
What would be your advice to IFAs who are considering registering with SEBI as RIA?
Do it now! You have no choice after three years as SEBI has given enough time and offered clarifications on RIA rules. You cannot say you were unaware or you needed more time.
