|Chennai||Rs. 24970.00 (-0.44%)|
|Mumbai||Rs. 25970.00 (0%)|
|Delhi||Rs. 25350.00 (-0.59%)|
|Kolkata||Rs. 25440.00 (-0.04%)|
|Kerala||Rs. 24900.00 (-0.8%)|
|Bangalore||Rs. 25200.00 (0%)|
|Hyderabad||Rs. 25080.00 (0.12%)|
A significant portion of the 79,000-odd independent financial advisers, or IFAs, foot soldiers of the Rs 7-lakh-crore mutual fund sector, might not qualify for the new investment adviser regulations notified by the Securities and Exchange Board of India (Sebi). The regulations, broadly follow the provisions brought out in a discussion paper last year. They prescribe minimum educational qualifications, capital requirements, infrastructure requirements and personnel requirements such as compliance officers.
The regulations also bar advisers from earning any remuneration other than fees from investors.
Intermediaries say while the move seeks to raise the bar for people entering the profession, onerous prescriptions that increase the costs of operations on the one hand and cap revenue on the other would keep most advisers away. “The majority of them have given up the idea of becoming investment advisers for good,” said Suresh Sadagopan of Ladder7 Financial Advisories. “Existing financial intermediaries such as mutual fund and insurance agents are the ones trying to make the transition as advisers. They might be earning 5-15 per cent of their income from fees. The provision barring them from taking commission means it would not work for most small players,” he added.
Dhruv Mehta, chairman, Foundation of Independent Financial Advisors, said, “The regulations are prohibiting a hybrid model. They are saying you can have a fee-only model or a commission-only model. That is something that could have been left for the investor and adviser to decide. Sebi is prescribing the ways to do business and the revenue model to adopt.”
The regulations exempt intermediaries registered with the Association of Mutual Funds in India (Amfi) from registration as investment advisers. As of September-end, there were 86,240 Amfi registration number (ARN) holders. Of these, 79,639 were individual ARN holders, while 6,601 were corporate ARN holders. Besides, there are 45,932 corporate employees registered with Amfi as corporate ARN holders.
“Advisers can’t take commission. But there is no bar on distributors taking fees. So, we will remain a distributor,” said Gajendra Kothari of Etica Wealth Management. He added the net worth requirements of Rs 1 lakh for individuals and Rs 25 lakh for corporate entities were unviable.
Entrants also need a post-graduate degree or a post-graduate diploma. Pankaj Mathpal, certified financial planner and managing director, Optima Money Managers, said, “Going by the minimum education qualification prescribed, not every distributor can become a financial adviser. However, Sebi also says a graduate with five years of experience in financial products would qualify. Under this, I expect a lot of distributors to make the cut.”