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Want to Register as Investment Advisor: A Must Read!

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Introduction

What does it mean by registered investment advisor?

In a layman language a registered investment advisor can be understood to include an individual or an entity that specializes in providing advice related to financial matters. The investment advisor holds the sole responsibility to give such advice to the clients that behold their best interests and ensure their obligation towards them. The registered investment advisors ought to be registered under the regulations of SEBI. 
Read Our Service: Investment Adviser Registration Process 

The very work of these advisors comprise in tailoring a financial plan that must take into account the finances of its customers.

Fees charged by registered investment advisors

The investment advisors charge a fee for the services they provide. It generally consist of a flat fee for drafting a financial plan and the subsequent fee for ongoing services. The fees charged by them includes the following types:

  • Asset related percentage: This fee is usually drawn from the client directly which is based on the asset size.
  • Flat fee: Flat fee accounts for a fixed amount as charged by the investment advisor that too annually. Mutual consent forms the basis of the fixation of such fee.

Registered investment advisor: Detailed overview

In our country, India, mostly all the financial services are regulated by an entity known as SEBI. To be called as an investment advisor, it seeks registration with SEBI in order to be able to impart investment related advice. The crucial point that must be kept in mind is that the investment advisors must swear by the laws and regulations.

As mandated by SEBI it is advisable that all the investment advisors must priorities the interests of its customers rather than their own. They must perform their duty unconditionally.

To add on, these advisors must have a cordial relationship with its clients and must not hide any potential obstacles that might pose threat to their interests. Their work ethics must involve transparency at all levels.

The registered investment advisors simultaneously perform various roles like having to impart advice related to tax saving or managing the portfolio effectively.

Investment advisor: eligibility

Any individual, group of individuals in the form of body corporate that put forth an intention to engage in the advice related to business pertaining to investment holds the eligibility to be an investment advisor. Further it is a mandatory feature that demands registration with SEBI in case the clients run ahead the marking of 150.
Read Our Blog: Registration of Mutual Fund with SEBI

Some of the entities however fall in the exemption category that do not require to be registered with SEBI:

  1. Advisors related to pension that are registered with PFRDA
  2. Agents related to insurance that encompasses registration with IRDAI.
  3. Members of ICSI
  4. Distributors related to mutual fund that are registered with AMFI etc.

Investment Advisor: Regulations

All the investment advisors in India are governed by the SEBI investment Advisers Regulation of 2013. It is prescribed by SEBI all the requisites related to how and what services to be implemented. The enumerated regulations govern the RIA's:

  • Qualification: This includes having a postgraduate degree or diploma in the fields like banking, finance, and commerce with experience entailing 5 years. Level 2 certification (NISM) would also work. 
  • Registration process: In order to become investment advisor, there is a requirement to be registered with SEBI through the means of Form A. Form A must be tagged along with the requisite documents:
  1. Qualification proof
  2. Certification that shows experience
  3. Identify proof
  4. Requisite fee
  5. Record of income tax returns

Investment Advisor: Requisite Agreements

Registered investment advisors enter an agreement that talks about their advisory services in order to ensure transparency. Although the agreement's format is not prescribed by SEBI, the conditions are very well specified.

Fees Charged Structure

In order to ensure that the reasonable fees are being charged by the investment advisors registered with SEBI, it has laid down a system that regulates the charging of fees. It is only after amendments that now the fee structure is regulated by SEBI. The basic proposals are as follows:

  1. 2.5% of AUA annually per family
  2. Rs 75k to be charged annually per family.

Investment advisor: obligations

The responsibility that follows after being registered as investment advisor runs beyond the mere fetching of certification. The registered investment advisors must adhere to reasonable practices that they must inculcate in delivering their duty. It encompasses the factors that help in identifying any potential threats that pose as an obstacle to interests of clients. It is also their duty to make sure that the customer is well versed with the ongoing transactions.

Additionally the investment advisor must lend a patient ear to the client’s needs and suggest an appropriate selection process. The advice must be in tune with the asset suitability.

Conclusion

In the nutshell it can be concluded that in order to be called as investment advisor, one must fetch registration with SEBI in India. The work of the investment advisor is quite technical and must be patiently performed.

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Author
Vinay Singh
Vinay Thakur is Managing Partner in Corpseed. He focused on payments, digital transformation, and financial technology for over 15 years and holds strong expertise on fintech startups, banking innovation, and investors with a keen understanding of the trends and activities of startups, banks, and investors in the space.