If you seek expert guidance on investing your money in the stock market, you might want to consult a SEBI Registered Investment Advisor.
A SEBI Registered Investment Advisor is a professional authorized and registered by the Securities and Exchange Board of India (SEBI) to provide financial advisory services to clients. But what does it mean? And what are the eligibility criteria and regulations that one has to follow to become one?
In this article, we will answer these questions and more and help you understand the role and benefits of a SEBI Registered Investment Advisor.
What is a SEBI-Registered Investment Advisor?
Imagine you have some money to invest in the stock market but are unsure how to go about it. You want to make intelligent and profitable decisions but don’t have the time or expertise to do your own research and analysis. You wish you had an investment advisor who could guide and advise you on the best investment options for your goals and risk appetite.
Well, that’s where a SEBI-Registered Investment Advisor comes in. Providing financial advice to clients is the job of a SEBI-Registered Investment Advisor, a professional with the SEBI’s approval and registration.
With the right knowledge, experience, and qualifications, an investment advisor helps you plan and execute your investment strategy. They must also follow a code of conduct, disclosure norms, and regulations set by SEBI to ensure that they act in your best interest and protect you from any conflicts of interest or malpractices. A SEBI-registered Investment Advisor can help you achieve your financial dreams by giving unbiased, transparent, and personalized advice.
Who needs to register as an Investment Advisor?
Does helping people accomplish their financial goals excite you? Do you have the knowledge and skills to advise them on the best investment options for their needs? If yes, then you might want to consider becoming an Investment Advisor.
An Investment Advisor is a professional who provides financial advice to clients for a fee. However, not anyone can call themselves an Investment Advisor. You need to register with the Securities and Exchange Board of India (SEBI), the regulator of the securities market in India, to become a SEBI Investment Advisor.
By registering with SEBI, you must meet specific eligibility criteria, follow a code of conduct, and comply with various regulations that ensure that you act in the best interest of your clients and protect them from any unethical practices.
By becoming a SEBI Investment Advisor, you can pursue your passion and earn the trust and respect of your clients and the industry.
Rules for a SEBI Certified Investment Advisor (RIA)
You must follow the Securities and Exchange Board of India (SEBI) rules and regulations to become a Registered Investment Adviser (RIA) in India. SEBI is the regulator of the securities market in India, and it aims to protect investors’ interests and promote market development. SEBI has issued the SEBI (Investment Advisers) Regulations, 2013, which lay down the eligibility criteria, registration process, code of conduct, disclosure norms, and compliance requirements for RIAs.
- You need to have a minimum graduate degree qualification in any discipline and a certification from an accredited institution, such as NISM or CFP.
- You must have a minimum experience of five years in the financial services industry or as a financial analyst, researcher, or teacher.
- You must maintain a net worth of at least Rs. 5 lakhs.
Registration as an Investment Advisor
- You must pay SEBI a registration fee of Rs. 10,000 and a yearly fee of Rs. 5,000.
- You must follow a fiduciary duty towards your clients and act in their best interest without conflict of interest or inducement.
- You must adhere to SEBI’s code of conduct, ethics, and professional standards.
Agreements between clients and RIA
- You need to disclose all the fees associated with your services and obtain written consent from your clients before charging them.
- You have to sign a contract with your clients, stating the rules and obligations of your services, the extent and restrictions of your guidance, the hazards, the responsibility and compensation provisions, and the conflict settlement method.
Fees to be charged from clients
- You can charge fees from your clients based on the type and complexity of the services provided, the duration and frequency of the advice, the assets under advice, and the market conditions.
- You can charge fees as a fixed amount, a percentage of the assets under advice, or a combination of both.
- You cannot charge fees based on the performance or returns of the investments or receive any commission or incentive from any other person or entity for recommending any particular product or service.
Ongoing obligations of a SEBI Registered investment adviser
Being a Registered investment adviser is not a one-time affair. You have to constantly comply with the rules and regulations set by the SEBI, the regulator of the securities market in India. Some of the ongoing obligations that you have to fulfill are:
– You must renew your registration every five years by paying a renewal fee of Rs. 5,000 to SEBI.
– You have to submit annual reports to SEBI, containing information such as the number of clients, the assets under advice, the fees charged, the complaints received, and the action taken.
– You must undergo a mandatory audit by a chartered accountant every year and submit the audit report to SEBI within six months from the end of the financial year.
– You must ensure that your employees and representatives are also qualified and certified to provide investment advice and that they follow the same code of conduct and regulations as you.
– You must inform SEBI of any change in your information, such as your address, contact details, directors, shareholders, or business activities, within 15 days of such change.
– You must abide by the SEBI guidelines on segregation of advisory and distribution activities and ensure that there is no conflict of interest or cross-selling between the two.
By fulfilling these ongoing obligations, you can maintain your status as a Registered investment adviser, and provide quality and ethical advice to your clients.
Why should you choose a SEBI registered investment advisor?
By hiring an investment advisor or an investment advisory firm, you can enjoy the following benefits:
A SEBI registered investment advisor with the qualifications, certification, and experience can help you analyze your financial situation, understand your risk appetite, and design a customized portfolio that suits your needs and goals.
A Registered investment advisor follows a code of conduct and disclosure norms set by SEBI, like the fees charged. Also provides you with periodic reports and updates on your portfolio performance and any changes in the market conditions.
A Registered investment advisor acts as fiduciaries, meaning they have a legal and ethical obligation to put their interests above their own. They do not receive any commission or incentive from any other person or entity for recommendations, ensuring that products or services are not cross-selling or mis-selling.
A Registered investment advisor can save you a lot of time, paperwork, documentation, and compliance requirements by taking care of all the aspects of your investment journey, from planning to execution to monitoring.
The Bottom Line
Competition of RIAs in India is diverse. Registered Investment Advisors face competition from various players, such as mutual fund houses, hedge funds, wirehouse firms, online or discount brokers, and robo advisors. These competitors offer investors different types of services, products, fees, and value propositions.
In such a competitive environment, it’s natural to wonder, “How do I find my SEBI-registered investment advisor?” But don’t get bogged down; review their profile and see if they adhere to SEBI’s code of conduct, disclosure norms, and record-keeping requirements. Choosing a good investment advisor firm, on the other hand, can not only help you smartly maintain a healthy and balanced portfolio but also taste good return.
I’m Archana R. Chettiar, an experienced content creator with
an affinity for writing on personal finance and other financial content. I
love to write on equity investing, retirement, managing money, and more.