In India, not everyone can offer investment advice. They must first be registered as an investment adviser (RIA) with SEBI. Once registered, they must act as a fiduciary – meaning they must always put the client first. In other words, prescribe only commission-free products (those that come under SEBI) if the adviser charges fixed fees or assets under management. Whether you are only an investor or looking to become an investment advisor, the following guest post is compelling.
About the author: In this post, Ajay Pruthi, a SEBI-registered investment advisor who charges a flat/fixed fee independent of client net worth, discusses the requirements and qualifications for becoming a registered investment advisor in India.
Ajay is a member of fee-only India, an informal association of SEBI RIAs who charge a flat fee. He is also on freefincal’s list of SEBI-registered advisors. You can contact Ajay via his website, plnr.in Over to Ajay.
How do you become a Registered Investment Adviser (RIA) in India?
Till 2013, there was no clarity on who can be an Investment Adviser in India. Without any regulations, anybody could claim to be an adviser!
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Why SEBI Regulation is necessary for Investment Advisers?
Most financial products in India are loaded with the agent’s commission and the products are too complex for the investor to understand. Agents used to advice clients which were not really in the interest of the investors. Since the agents represent few companies, they can sell products of only those companies. Market Regulator, Securities and Exchange Board of India (SEBI) felt the need of segregating distribution and advice. SEBI introduced regulations for investment advisers for the first time in 2013, and since then, there have been various changes in regulations and compliance requirements for investment advisers. As per the regulations, no person shall act as an Investment Adviser unless he has obtained a certificate of registration from SEBI. This will help an investor to avail the services of an RIA and make investments without the fear of any conflict of interest. The RIA is compensated only through the fee paid by the investor. This will ensure that the RIA will protect the interest of the investors by recommending the best suited financial products as per the need of the investor.
Who can be an Investment Adviser in India?
An individual, partnership firm, body corporate or a company can apply for registration as Investment Adviser. An individual working in a corporate can apply for part-time advisor.
*For part-time adviser- Where the applicant is employed and has applied for registration as a part-time investment adviser, the applicant shall enclose a no objection certificate from the employer. In case of change in employment, the applicant shall provide no objection certificate from the new employer.” Also, part-time adviser should not be managing money or funds of clients and should not be providing advice for any product for investment purpose in their current employment.
Qualification to apply for registration as an Investment adviser in India
If you want to apply for registration as an Investment Adviser in India, you should have the following minimum qualifications:
Graduate degree, professional qualification or post-graduate degree or post graduate diploma in finance, accountancy, business management, commerce, economics, capital market, banking, insurance or actuarial science, or other financial services as may be specified from a university or an institution recognized by the central government or any state government or a recognised foreign university or institution or association.
Experience
No experience is required if you have above qualifications, otherwise you may have to go for professional qualifications or pots-graduate degree as specified above.
NISM provides numerous courses to help individuals become investment advisers if they don’t possess the necessary qualifications. You can check it here- https://www.nism.ac.in/long-term-programs/
Certification
A graduate or post graduate can pass the following 2 examinations by National Institute of Securities Markets (NISM) and apply to SEBI for registration as an Investment Adviser.
- NISM – Series-X-A: Investment Adviser (Level-1) Certification Examination
- NISM- Series – X-B: Investment Adviser (Level-2) Certification Examination
Fees to be paid
SEBI Registration
Individual/Partnership- Rs.2,000
Body Corporate/ LLP – Rs. 10000
BASL Membership (3 Years Block Fee)
Individual/Partnership- Rs.6,000
Body Corporate/ LLP – Rs. 3,00,000
Deposit Requirements
An investment adviser shall maintain a deposit of such sum, as specified by the Board from time to time.
Up to 150 clients – Rs. 1 Lakh
151 to 300 clients – Rs. 2 Lakhs
301 to 1,000 clients – Rs. 5 Lakhs
1,001 and above clients – Rs. 10 Lakhs
Client Limit
Individual Adviser- 300 Clients at any point of time or fee collection of 3 Crores during financial year.
Non-Individual Adviser – No Limit
Part-time Adviser- 75 Clients in total at any point of time
Part Time Adviser-
Process of application for registration as an Investment adviser (RIA)
You can get the details from BSEASL website. Please see the relevant link giving the details.
https://www.bseasl.com/
Documents to be submitted to SEBI along with application
You have to submit the following documents (self-attested) along with application in Form A.
- Proof of Identity
- Proof of address
- Proof of qualification
- CIBIL Score
- Deposit Certificate
- Income Tax Returns for the last 3 years
- Application fee as applicable
- Various declarations as the case may be.
You have to send a soft copy of these documents to the BSEASL.
BSEASL will upload these documents o SEBI Portal
SEBI will scrutinise your application and if there is any discrepancy, they will point out so that you can rectify them. Once your application is approved, you will get an intimation to pay the registration fee. You can make the fee payment at this stage. On receipt of the fee and paying membership fee to BSEASL, you will get registration as Investment Adviser.
The registration is valid till it is suspended or cancelled by SEBI
Compliance Issues
An investment adviser which is a body corporate or a partnership firm is required to appoint a compliance officer who shall be responsible for monitoring the compliance by the investment adviser. In the case of an individual RIA, he himself is responsible for such compliance. In case of partnership firm, one of the partners can be Principal Officer if the partner has required qualification and certification. Yearly audit by a Chartered Accountant/ Company Secretary is required to ensure compliance.
An investment adviser shall act in a fiduciary capacity towards its clients and shall disclose all conflicts of interests as and when they arise. He shall act honestly, fairly and in the best interests of the clients.
Grievance Redressal
SEBI has launched a new web-based grievance redressal system called SEBI Complaint Redress System (SCORES). Investors can lodge their complaints at http://scores.gov.in. On receipt of complaints, SEBI takes up the matter with the concerned investment adviser and follows up with them for redressal.
or investors can go for online conciliation and/or online arbitration by participating in the ODR (Online Dispute Resolution) by accessing the portal
- https://smartodr.in/login
- * SEBI will not address grievances for products that fall outside its jurisdiction, such as insurance or cryptocurrency.
- Fees from Clients
SEBI Regulation has fixed upper scale of fee to be charged by the Investment Adviser from clients.
Fixed Fee – Rs. 1,51,000 per annum
Assets under Management – 2.5% of Assets
For any fee amount less than the maximum limit – It is as per the agreement between the client and the investment adviser. Further, an investment adviser shall ensure that fees charged to the clients are fair and reasonable.
The fee can be collected for maximum 1 year in advance.
Distribution activities by RIA
If you are a SEBI registered Investment adviser, you cannot sell any financial products to your clients and earn commission (the products which come under SEBI). This rule is to ensure that you recommend the best-suited products to the client without any conflict of interest.
But RIAs other than Individuals can have a separate division for distribution! The adviser is required to segregate distribution and execution services. The investment advisory has to be provided by a separately identifiable department or division or through a subsidiary. Further, such distribution or execution services can only be offered subject to the following conditions: The client shall not be under any obligation to avail the distribution or execution services offered by the investment adviser or its affiliates. The investment adviser shall maintain arms length distance between its activities as investment adviser and distribution or execution services.
An investment adviser shall disclose to his client, any consideration by way of remuneration or compensation or in any other form whatsoever, received or receivable by him or any of his associates or subsidiaries for any distribution or execution services
Individuals registered as Investment Adviser can continue to receive the trailing commission for the distribution services provided by them prior to grant of registration as an Investment Adviser.
Who are exempted from SEBI registration?
Insurance agents or insurance brokers registered with IRDAI, pension advisors registered with PFRDA, who provide advice in various insurance /pension products are exempted from getting SEBI registration. Mutual Fund Distributors registered with Association of Mutual Funds in India (AMFI) can only provide basic advice to its mutual funds clients incidental to its distribution activity. They can also function without SEBI registration. Members of the Institute of Company Secretaries of India, Institute of Chartered Accountants of India, Institute of Cost and Works Accountants of India who provide investment advice to their clients incidental to their professional services are exempted from obtaining registration under IA Regulations.
Fee only financial Planners
If you are looking for a financial planner, it will be better to approach a fee only financial planner who is not into any distribution activities. Distribution through the sister concern can also defeat the spirit of fee only financial planning. You can get the list of fee only financial planners in India from SEBI website. A privately curated list is also available at Freefincal: List of Fee-only Financial Planners in India
*Disclaimer- Nothing contained in the article is a solicitation, recommendation, endorsement, or offer by me. If you have any doubts as to the merits of the article, you should seek advice from an independent financial advisor. Registration granted by SEBI, membership of BASL, and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors. Investment in securities market is subject to market risks. Read all the related documents carefully before investing.
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About The Author
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 ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! ⇐ More than 3,000 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 condition is!! Watch the first lecture for free! One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
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