How to choose an SEBI registered investment adviser

Financial services in India are regulated by SEBI. Only those registered as investment advisers with SEBI (SEBI RIAs) are authorised to provide financial planning advice. SEBI recently warned the public not to engage with anyone who is not a registered investment adviser. If you are looking for financial advice, here is how a SEBI registered investment advisor can be chosen.

The idea behind the investment adviser regulations is to eliminate conflict of interest. Those who distribute products regulated by SEBI (mutual funds, shares, bonds) can only offer “incidental advice" about the product. They cannot offer investment advice.

Those who offer investment advice cannot earn from product commissions. Unfortunately the stipulation here is weak. SEBI RIAs are suppose to maintain an “arms length" relationship from product distributors. In my opinion, this has been conveniently interpreted. RIAs have chosen to “shift" their distribution business to their spouses, parents, children etc.

The total number of RIAs are extremely small in number. A majority of those in financial services have not bothered to comply with SEBI regulations. I believe the investor community should shun those who have not complied. SEBI say so too.

That said, because of the convenient interpretation of the arms length rule, not all SEBI RIAs are the same. Hence this post.


How to choose an SEBI registered investment adviser

Step 0: Choose only those registered as individuals. Others (Body corporate,company, limited liability partnerships and others) most likely would have a tie-up with a distribution partner (a close relative or friend) through a “separately identifiable division” (SID).

Stay away. Choose only those registered as individuals

You can know about their registration status here: List of Registered Investment Advisors

Step 1:

A If you are going to invest in stocks, the SEBI RIA or any of their relatives or associates should not be broker. Get stock advice and invest where convenient, say via your bank.

B If you want to invest in mutual funds, decide whether you want to choose direct plans (and earn about 0.5 to 1% more return for each year of investment) or if you want the “convenience" of regular mutual fund plans.

Get investment advice from the SEBI RIA and “go direct". Or get investment advice and buy regular plans from your bank or online distribution portal. Do not buy them from anyone suggested by the RIA, their relatives or associates.

So the idea is simple, pay for investment advice alone and invest via an independent third party.

If you are clear about how you are going to manage this step, then choosing a SEBI RIA become so much more simpler.

Step: 2

Recognise that it is not possible for an investor to judge the competence of a investment adviser with just a few interactions. The proof of the pudding is in the eating and the pudding (financial goals) is not yet ready (achieved).

So referrals do not help much, except perhaps find out how the RIA behaves (see below) after the ‘financial plan’ is ready.

So choosing a RIA is pot luck!

Step 3:

Any selection process requires a shortlist. If you require some help, I have a SEBI RIA list of fee-only financial planners in India. This is neither an exhaustive list nor a recommendation, just a starting point.

If you don’t like this, create your own shortlist by following steps 4 and 5. Even if you use the shortlist, steps 4 and 5 are crucial.

Step 4:

When you begin the interaction with SEBI RIA, make it clear to them that you will not invest “via them or via any agency recommended by them". Look at their facial expressions carefully.

If they don’t bat an eyelid and are perfectly okay with your strategy, you can move forward. If they appear disturbed and make excuses like, “we cannot keep track of your portfolio", etc, end the conversation then and there.

Read more: Pay for Financial Advice, But Insist on Direct Mutual Fund Plans (even if you want the convenience of regular plans via an independent third party).

Why end the conversation? Because Portfolio management is possible without AMC Feeds!

Step 5:

Now that the SEBI RIA has not issues with you investing via a third party or direct plans, next come the issues of comfort level and fees.

‘Comfort levels’ are subjective and you are the best judge. When it comes to fees, I recommend a fixed fee for plan creation and a fixed fee for review.

Many charge a fee linked to the size of the portfolio. I am not a fan of this. I am also not a fan of the adviser obtaining account statements (a fancy term for AMC feed) of direct plans via third parties.

The idea is quite simple. You pay for financial advice and invest independently (with or without paying trail commission). The investment plan is periodically reviewed by the SEBI RIA periodically.

It is our money. No one cares about it like we do. Let us help SEBI eliminate conflict of interest in the financial services industry and deal only with SEBI registered investment advisers who encourage clients to invest ‘independently’.

Want to conduct a sales-free "basics of money management" session in your office?
I conduct free seminars to employees or societies. Only the very basics and getting-started steps are discussed (no scary math):For example: How to define financial goals, how to save tax with a clear goal in mind; How to use a credit card for maximum benefit; When to buy a house; How to start investing; where to invest; how to invest for and after retirement etc. depending on the audience. If you are interested, you can contact me: freefincal [at] Gmail [dot] com. I can do the talk via conferencing software, so there is no cost for your company. If you want me to travel, you need to cover my airfare (I live in Chennai)

Connect with us on social media

Do check out my books

You Can Be Rich Too with Goal-Based InvestingYou can be rich too with goal based investing

My first book is meant to help you ask the right questions, seek the right answers and since it comes with nine online calculators, you can also create customg solutions for your lifestye! Get it now . It is also available in Kindle format .

Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want

Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you want
My second book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at low cost! Get it or gift it to a youngearner

The ultimate guide to travel by Pranav Surya

Travel-Training-Kit-Cover This is a deep dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, how travelling slowly is better financially and psychologically with links to the web pages and hand-holding at every step. Get the pdf for ₹199 (instant download)

Create a "from start to finish" financial plan with this free robo advisory software template

Free Apps for your Android Phone

All calculators from our book, “You can be Rich Too" are now available on Google Play!
Install Financial Freedom App! (Google Play Store)
Install Freefincal Retirement Planner App! (Google Play Store)
Find out if you have enough to say "FU" to your employer (Google Play Store)

About Freefincal

Freefincal has open-source, comprehensive Excel spreadsheets, tools, analysis and unbiased, conflict of interest-free commentary on different aspects of personal finance and investing. If you find the content useful, please consider supporting us by (1) sharing our articles and (2) disabling ad-blockers for our site if you are using one. We do not accept sponsored posts, links or guest posts request from content writers and agencies.

Blog Comment Policy

Your thoughts are vital to the health of this blog and are the driving force behind the analysis and calculators that you see here. We welcome criticism and differing opinions. I will do my very best to respond to all comments asap. Please do not include hyperlinks or email ids in the comment body. Such comments will be moderated and I reserve the right to delete the entire comment or remove the links before approving them.