Finally, Its here! I am a “SEBI Registered Investment Advisor (RIA)”

Dear Readers,

I am so pleased to share the happy news with you that by the God’s grace, blessings of elders and best wishes of friends and you, my readers, on March 5, I have received SEBI license to act as an “Investment Advisor”

This culminates all my hard work over the past 2 months to complete all formalities regarding the registration, discussions with SEBI officials, payment of requisite fee etc.

In today’s post, I will briefly share my experience in getting the license, and what this means to my practice and way it will help me serve my financial planning clients in a better way.

Also, if there are any financial advisors who are on the edge and not clear on the formalities, this post will help you get some clarity and any queries, I am all ready to help out do post it in comments section.

Getting IA Registration: My story

SEBI released (Investment Advisors) Regulations in 2013, and I had written a post on what this regulation is all about, and barring a few exceptions, why now everyone offering standalone fee based financial advice need to register with SEBI.

Even at the time I wrote this post, there was not much clarity about the way to go within the professional circles and mostly the financial planners were waiting and watching on the fence.

This was also partly due to the fact that the regulations imposed a lot of new compliance requirements on the planners like keeping a CRM, signing and retaining the documents, detailed risk profiling, which was a bit daunting for many who were new in the profession.

For me, I too was also quite apprehensive and since I was in a full time job at that moment, there was not a question to apply at that time. Even after quitting my job, I spent some time reflecting on my business and where I want to take it  – to deliver fee-only advice, or to sell products, and finally I decided that fee-only advice was what I wanted to do for the long term, and for that I HAD to register myself under the regulations.

So, after quitting my job, the first thing I took up as a project was to apply as an Investment advisor.

I submitted the initial set of documents on January 6, 2014. Post that, there was a query raised on 1-2 additional documents and a telephonic discussion by concerned SEBI official who was handling my case, and that was it. I received the final registration certificate on Wednesday March 5, exactly 2 months after I had applied. Check out my prized registration certificate below:

One very very pleasantly surprising thing I noticed during the whole registration process with SEBI was the very pleasant and humble attitude of SEBI official who handled my case.  Having worked with regulatory bodies in my compliance job in insurance company, I was initially very hesitant and thought that I am a small guy in front of SEBI which deals with the big boys of industry, but the response I got was very warm, my application was disposed in quick time, clarifications sought were duly conveyed and responses taken, and overall manner of handling was very smooth and positive. So yes a BIG THANK YOU to SEBI!

List of Compliances required of a SEBI Registered Investment Advisor

 As a registered Investment advisor, there are SO MANY COMPLIANCES that I will have to do in my day to day activities. Rather than treating them as an unnecessary headache, I think they will go a long way in improving the overall quality of advice and my service delivery to my clients, and in long run, will result in a “Consumer Delight”, which is the ultimate aim of any business.

For you as a consumer too, it is a big plus to do business with a Registered Investment advisor because apart from the necessary experience and qualifications, a good compliance framework will ensure that the advice you get is authentic and without any conflict of interest.

I am listing some of top of the mind day to day compliances that I will be required to follow under these regulations:

  • Following the mandated “Know Your Client” procedure
  • In all correspondence with clients, use of words “Investment Advisor”
  • Obtaining detailed information from client on financial assets/ income, risk appetite, liabilities etc.
  • Doing a proper risk profiling of the client and communicating the same to the client
  • Periodic updation of information in risk assessments
  • documented process for selecting investments based on client’s investment
  • objectives and financial situation
  • recommendation or advice is based upon a reasonable assessment that the structure and risk reward profile of financial product
  • Full disclosures to prospective clients on all material information about itself including its business, disciplinary history, the terms and conditions, affiliations etc. to enable an informed decision on whether or not to avail the services
  • Disclose to the client holding or position, if any, in the financial products or securities which are subject matter of advice and any conflicts of interest
  • Material facts relating to the key features of the products or securities, particularly, performance track record, warnings, disclaimers etc.
  • Detailed records for KYC, risk profiling etc. for minimum period of 5 years
  • Annual audit from a CA
  • Process for prompt redressal of grievances

 3 TOP Positives from this change, and how it will help me serve my clients in a better way

For any new financial planner who is trying to establish his foothold in the industry, apart from the normal challenge of getting clients and serving them in best way possible, in financial planning world, there are bigger challenges as follows:

  • Trust (yes, I will share my financial details only with whom I have trust, not anybody and everybody and establishing trust particularly in online model takes a very long time…)
  • Credibility (People need some sort of credibility in terms of qualification, professional affiliations and a trust that the person is regulated by a professional body)
  • Perception (having lost money investing on the word of unscrupulous agents calling themselves as “financial planners” and “financial consultants”, people are now wary of anyone who calls himself by this name and it is really not easy to change that perception in first meeting/ interaction)

As a financial planner, I also face these challenges day in and day out. But there are 5 immediate positives from these regulations that will help my overall service delivery to the end consumer:

a)    Helping me position myself better in front of my prospects:

 As compared to a financial planner, when you say “SEBI Registered Investment Advisor”, it conveys a lot of respect and security, because people get the trust that the person is regulated by an entity like SEBI.

Also, being a registered Investment Advisor is the only LEGAL way you can do fee-only financial planning business, so anyways now this is not a good to have but a must-have.

b)    Trust building by eliminating conflict of interest, and proper disclosures:

 Since a SEBI registered Advisor cannot earn any commission/ remuneration from sale of products, conflict of interest is eliminated. Also, there are a host of mandatory upfront disclosures to provide necessary comfort to a prospective client entering into a relationship with me.

 c)      Process-oriented financial advice and far better housekeeping:

 The focus of the regulation is to have systems and processes in place for very essential things like risk profiling, product selection, etc. Also there is a requirement for maintaining client documents, and annual audit from a CA.

Over the 2 months where I was waiting for the license, I made good use of the time by preparing detailed templates for these matters – this has definitely made my service architecture more robust.  

Overall I feel that though these things seem a burden initially, ultimately, it’s the client who will benefit from this and if the client benefits, then as a planner, I will do so invariably, so it’s WIN WIN for both me and the client!

Summing Up

We’re here to put a dent in the universe.

– Steve Jobs

This license reflects my serious intention to make a mark for myself in the financial planning world, and its a big start to a journey to be a student and learn the best of the practices, and really make a difference in the society as Steve Jobs said – dent in the universe! 

In this happy moment, I cannot but not thank my readers: Your love and support is only what makes me tick and do my work everyday with enthusiasm: I will need lots of it as I move forward in this journey. THANK YOU.

OVER TO YOU:

As a consumer, will this new regulation and compliances renew your lost faith in financial services field?

In your opinion will these regulations improve the quality of advice and set some minimum benchmarks?

With the new regulations making it compulsory for all advisors to register, how likely will you want to deal with a registered advisor vis a vis a non-registered one?

If you are a financial planner, what are your challenges in registering with SEBI?

 Do share and I will try my best to help you out.