Who is a SEBI Registered Investment Advisor?

A Securities and Exchange Board of India (SEBI)-registered investment advisor must fulfil the minimum qualification and experience criteria, clear a certification exam, and comply with stringent regulations and ethical standards.

As financial markets and investment instruments grow increasingly complex, SEBI-registered investment advisors offer expert guidance on investment decisions. Their services encompass financial planning, investment management, Retirement planning, and Tax Planning.

What is a SEBI Registered Investment Advisor?

A SEBI-Registered Investment Advisor (RIA) is a professional authorised and registered with the SEBI to provide financial advisory services. These advisors must adhere to SEBI's code of conduct and disclosure norms while meeting specific qualifications and experience criteria. The main goal of a SEBI-Registered Investment Advisor is to offer unbiased, personalised investment advice tailored to a client’s Financial goals, risk profile, and investment preferences. You can expect reliable and transparent guidance by working with a registered advisor.

Who Must Register as an Investment Advisor?

Anyone who provides investment advice or research analysis related to securities must register as an Investment Advisor (IA) with SEBI under the SEBI (Investment Advisers) Regulations, 2013. This requirement applies to individuals, partnership firms, LLPs, companies, and other entities Offering a fee for investment advisory services.

Representatives and employees of investment advisory firms who directly interact with clients and provide advice must also be registered with SEBI. However, professionals like bankers, chartered accountants, or insurance agents who offer incidental advice as part of their services are optional to register as investment advisors. They can register with SEBI if they provide investment advice as a primary service.

SEBI Regulations for an RIA

Here are some essential rules that a RIA must comply with:

• Registration: RIAs must be registered with SEBI, fulfil the necessary qualifications and experience criteria, and pass a certification examination.
• Fiduciary Duty: RIAs must always act in the best interests of their clients, providing unbiased and objective advice.
• Disclosure: RIAs must disclose all relevant information about their investment products and services, including fees and additional charges.
• Record-Keeping: RIAs must maintain detailed records of all client transactions and interactions to ensure transparency and Accountability.
• Compliance: RIAs must adhere to all SEBI regulations, including advertising and marketing, managing conflicts of interest, and maintaining client confidentiality.

Eligibility Criteria to Become an RIA

To be eligible for registration as an RIA, the following criteria must be met:

• Must be at least 21 years old.
• Must have at least five years of relevant experience in the financial services Industry.
• Must not have any prior convictions for economic offences or violations of securities laws.
• Individuals must have a Net worth of at least ₹ 1 lakh, while non-individuals (such as firms or companies) must have a net worth of at least ₹ 25 lakhs.
• Must not be a stockbroker, sub-broker, Depository participant, or associated with such entities.

Qualification to Become an RIA

The candidate should hold at least a graduate degree in finance, Economics, or business administration or possess a professional qualification such as Chartered Accountant (CA), Chartered Financial Analyst (CFA), or Master of Business Administration (MBA). Additionally, they must pass a certification exam administered by the National Institute of Securities Markets (NISM) or another organisation recognised by SEBI.

How to Register as an Investment Advisor?

To become a SEBI-Registered Investment Advisor, follow these steps:

• Ensure you have the required degree and relevant work experience in related fields.
• Complete the NISM-Series-X-B: Investment Adviser (Level 1) certification exam.
• Submit an application to SEBI using Form A, including necessary documents such as identification, qualifications, CIBIL Score, work experience, Income Tax Returns, net worth certificate, and the application fee.
• A fee of ₹5,000 must be paid for the application.
• SEBI will review your application and may request additional information if needed.
• Upon approval, SEBI will issue a registration certificate, allowing you to offer advisory services.
• Ensure compliance with SEBI regulations and maintain ethical standards in your advisory practice.

Agreements between Clients and RIAs

Agreements between clients and RIAs are essential for defining the relationship and ensuring mutual understanding. These agreements detail the terms and conditions of the services provided by the RIA, including:

• The scope of services
• Fee structure
• Rights and responsibilities of both parties

Additionally, the agreements may address the RIA’s investment philosophy, the client’s investment objectives and risk tolerance, and the frequency of communication and reporting. They also include provisions for terminating the agreement and resolving any disputes between the parties.

Fees Charged to Clients by RIAs

SEBI regulates the fees that RIAs can charge through two approved fee structures:

• 2.5% of Assets Under Advice (AUA) annually per family
• ₹75,000 per annum per family

Competitors of Registered Investment Advisors (RIAs) in India

The financial advice Market in India is highly competitive, with several key players challenging RIAs:

• Traditional Financial Institutions: Banks and brokerage firms offer investment advice and Portfolio management services.

• Online Investment Platforms: These platforms provide investors with tools and resources for managing their investments independently.

• Robo-Advisors: Automated platforms that use algorithms to offer investment advice and manage portfolios at lower costs.

• discount Brokers: Firms that offer reduced trading fees and essential advisory services.

How to Find a SEBI-Registered Investment Advisor?

Here are some ways to find an RIA:

• Go to the SEBI website and use their search tool to access the list of registered investment advisors.
• Contact financial planning organisations or associations, which often have directories or can provide recommendations.
• Ask colleagues, family, or friends, for trusted investment advisors.
• Before selecting, verify the advisor’s credentials, experience, and registration status to ensure they are SEBI-registered.

SEBI Registered Advisory: Why Choose a SEBI-Registered Investment Advisor?

When you hire a SEBI-registered investment advisor or firm, you gain access to several key benefits:

• Expertise: A SEBI-registered investment advisor, equipped with the necessary qualifications, certifications, and experience, can thoroughly analyse your financial situation, and create a personalised portfolio as per your needs and goals.

• Transparency: Registered investment advisors adhere to SEBI's code of conduct and disclosure norms, including clear communication of fees. They also provide regular reports and updates on your portfolio's performance and market changes.

• Trust: As fiduciaries, registered investment advisors have a legal and ethical duty to prioritise your interests above their own. They do not receive commissions or incentives from third parties, ensuring their recommendations are free from cross-selling or mis-selling.

• Convenience: A registered investment advisor can Handle all aspects of your investment journey, from planning and execution to ongoing monitoring, saving you time and effort on paperwork, documentation, and compliance.

The Bottom Line

The landscape for RIAs in India is highly competitive, with RIAs facing competition from robo-advisors, discount or online brokers, wirehouse companies, hedge fund, and Mutual Fund Houses. These competitors provide investors various services, products, fees, and value propositions.

In such a crowded market, you might wonder, "How do I find the right SEBI-registered investment advisor?" The key is to review their profile and ensure they comply with SEBI’s code of conduct, disclosure norms, and record-keeping requirements. Selecting a reliable investment advisor can help you manage a well-balanced portfolio and achieve strong returns.