This article is an opinion piece on how to make affordable financial advice readily available in India. Financial advice here refers to financial advice without any conflict of interest. Or, in other words, fiduciary financial advice. That is advice that only has the best interests of the advice seeker in mind.
Having been around this arena for over a decade, I am fully aware that the suggestions mentioned below are far from practical due to opposing forces and the kind of criticism this article will likely meet. Nonetheless, I firmly believe they are the only way to ensure both parties – advisors and investors benefit.
What is the problem? Technically, theoretically, only those registered as investment advisors should offer financial advice in India. The eligibility for becoming registered is steep. A PG degree in finance and five years of experience are mandatory. While the latter is manageable, the former is hard for most people.
Then we have a 150-client limit for individual advisors. If they wish to breach this, they must have a net worth of Rs. Fifty lakhs and register with SEBI as a non-individual advisor. That is as a business.
SEBI’s intention here seems to be to dissuade shady individuals from becoming advisors and providing stock tips or bad financial advice. While well-intentioned, it also affects pure financial planners who do not offer stock advice or tips.
🔥Secure your future with our Robo-advisory tool trusted by over 3,500 investors and advisors. From effortless retirement planning to funding your children’s biggest dreams, turn your financial goals into reality. 🔥
Subscribe for money management solutions via email! (Link takes you to our email sign-up form) Join 32,000+ readers in our community.
👉 New Tool Alert! NaviPlan: A Privacy-Focused Multi-asset Tracker and Goal Planner 👈
The other aspect is affordability. The fees of most registered advisors are beyond the reach of many young earners and low-income families.
SEBI says mutual fund distributors can only offer incidental advice. This is an impractical rule. Investors routinely ask distributors for advice, and SEBI cannot stop them from doing so.
So “affordable” advice in India is often commission-based. Most Indians cannot afford to work with a SEBI-registered investment advisor.
What is the solution?
This a gentle reminder that the following is only my insignificant opinion. Nothing is ever going to come out of it.
The aim here is to make financial advice affordable and eliminate conflict of interest as much as possible.
- Categorize RIAs as per the nature of their work as SEBI registered stock advisors, SEBI registered financial planners etc., with individual eligibility requirements.
- Remove the requirement of PG qualification for at least SEBI-registered financial planners.
- Remove the barrier of 150 clients for those who practice only financial planning.
- Eliminate the option to charge fees as a percentage of assets. This is a proxy for trail commissions and has a conflict of interest. Remove the ceiling on flat fees.
- Eliminate the link between mutual fund distributors and AMCs. Redesignate all distributors as SEBI-registered mutual fund advisors. They get a constant commission from the amount invested and not on the market value of the total investment, and top of this, they can charge any flat fee for advisory on mutual funds.
- The commission now is the same whether the money is put into an overnight or sectoral fund because it only depends on the amount invested and not its current market value. There are no extra benefits or perks associated with recommending an NFO. So the conflict of interest is removed to a large extent.
- No product manufacturer can have any direct or indirect tie-up with any SEBI-registered individual. This includes events or personal sponsorships of any kind.
- A person can be a SEBI-registered financial planner AND a SEBI-registered mutual fund advisor. Other combinations like registered MF advisor and stock advisor or registered financial planner and stock advisor should also be allowed to ensure earning options are not limited.
- No service be it robo advisory or direct plan distribution, should be offered for “free”. The investors’ data should not be sold to any other entity, even if it is personally non-identifiable. No product manufacturer should have access to such data.
Many mutual fund distributors may get angry at the above suggestions. However, if one can work as a registered mutual advisor and a registered financial planner (or stock advisor), there is no limit on income. I firmly believe this will elevate their status as respected advisors and mutual fund experts instead of being seen as intermediaries, agents, or sales guys.
This is 2023, and the old excuse, “Indians are not willing to pay for advice, ” is no longer true. Indians are happy to pay for honest and reasonably priced investment advice.
I don’t claim the above suggestions are foolproof. Still, I believe they are necessary to make financial advice affordable by lowering the barrier for SEBI-registered entities to function and elevating the status of mutual fund distributors.
We should not limit the earning potential of any SEBI registered entity, but at the same time, ensure there is little or no conflict of interest in the advice provided, which is, of course, not easy to pull off.
The above system will result in readily affordable and nearly conflict-free advice. SEBI cannot force registered advisors to lower their fees, but SEBI can offer a conflict of interest-free alternative at lower price bands. By allowing more individuals to become registered advisors, we will have a much broader range of fees than is available now.
Those who cannot pay for a full financial plan pay only for unbiased product suggestions (this is not ideal, but it is up to the investor to make this choice). Such suggestions would be customised to the individual’s requirements and based on risk appetite.
As mentioned above, I am acutely aware that these suggestions are impractical because big guns like banks would vehemently oppose any commission reduction. Still, I would like to stick to my dream.
SEBI has so far played three roles. That of a product regulator and promoter, and protector of investor interests. It should shift its focus to putting investors and advisors first and leave the product manufacturers to survive by natural selection (within regulations).
We are on Google News
Use this button to add freefincal.com as a preferred personal finance source on Google News.
Explore 1,400+ videos on YouTube!
Subscribe to get posts via email!
Join 32,000+ readers and get free money management solutions delivered to your inbox! (Link takes you to our email sign-up form)Join our WhatsApp Channel
Explore our products
🔥Join our community of 9000+ users! 🔥- Use our Robo-advisory Tool to create a complete financial plan! More than 3,500 investors and advisors use this! Use the discount code robo25 for 20% off. Plan your retirement (early, normal, before, and after), plus non-recurring financial goals (such as child education) and recurring financial goals (such as holidays and appliance purchases). The tool helps anyone aged 18 to 80 plan for retirement, plus six non-recurring and four recurring financial goals, with a detailed cash flow summary.
- Our Flagship Course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! More than 3,500 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market conditions! Watch the first lecture for free! One-time payment! No recurring fees! Lifelong access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
- Join the freefincal investor circle! An exclusive space for investors, advisors, fintech employees and students to access financial planning and insurance tools, mutual fund and stock analysis tools, coding strategies and Excel macros for data extraction. 750+ members are now part of our investor circle.
- Increase your income by getting people to pay for your skills! More than 900 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner seeking more clients through online visibility, or a salaried individual looking for side or passive income, we will show you how to do it by showcasing your skills and building a community that trusts and pays you. (Watch the 1st lecture for free). One-time payment! No recurring fees! Lifelong access to videos!
- Portfolio Tracker! Track your mutual funds and stock investments with our Google Sheet!
- We also publish monthly screeners for
Our Podcast: Let's Get Rich With Pattu
On Spotify: Let's Get RICH With PATTU! Every single Indian CAN grow their wealth! On Audible: Listen to the Let's Get Rich with Pattu Podcast
Listen to the Let's Get Rich With Pattu podcast on YouTube.
Now watch Let's Get Rich With Pattu தமிழில் (in Tamil)!About The Author
Dr M Pattabiraman giving a lecture
- Dr M. Pattabiraman (PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras.
- He has over 14 years of experience publishing news analysis, research and financial product development. He has over 28 years of teaching and research experience. He is also a public speaker and keynote presenter.
- He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free, AUM-independent investment advice.
- Connect with him via @pattufreefincal on X LinkedIn YouTube
- Pattabiraman has co-authored three print books.
This book helps you ask the right questions and find the right answers. It also includes nine online calculators to create custom solutions.
(2) Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want. 
Both the boy and girl versions of "Chinchu Gets a Superpower".
Most investor problems stem from a lack of poor decision-making. We made bad decisions and money mistakes when we started earning, and we spent years undoing them. Why should our children go through the same pain? What is this book about? As parents, what if we had to groom one ability in our children that matters not only for money management and investing but for every aspect of life? My answer: Sound decision-making. So, in this book, we meet Chinchu, who is about to turn 10. The story follows what he wants for his birthday and how his parents plan it, while also teaching him key ideas about decision-making and money management. What readers say! 
Feedback from a young reader after reading Chinchu Gets a Superpower!
Must-read book even for adults! This is something that every parent should teach their kids right from a young age. The importance of money management and decision-making based on their wants and needs. Very nicely written in simple terms. - Arun.
About freefincal & its content policy
Freefincal is a News Media organisation dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact Information: To get in touch, please use our contact form. (Sponsored posts or paid collaborations will not be entertained.)Our publications
- Your Ultimate Guide to Travel. This is an in-depth exploration of vacation planning, including how to find affordable flights, budget accommodations, and practical travel tips. It also examines the benefits of travelling slowly, both financially and psychologically, with links to relevant web pages and guidance at every step. Get the PDF for Rs 300 (instant download)
- How to profit from content writing: Our ebook is for those interested in getting a side income via content writing. It is available at a 50% discount for Rs. 500 only!