Monday, September 9, 2024
HomeMutual FundGood move or bad move?

Good move or bad move?


In a Consultation Paper on Review of Regulatory Framework for Investment Advisers and Research Analysts dated Aug 6th 2024, SEBI has proposed the concept of a part-time investment advisor and research analyst. The comments on this paper closed on Aug 26th 2024. It is quite likely that it shall come to pass.

A recent news article on the subject opened with a reference to me, resulting in readers asking us if I wanted to apply for part-time advisor registration.  The short answer is no. I have no such plans.

Among the proposed stipulations are a no-objection certificate from their employer and a 75-client limit. The paper clarified elsewhere that the number of clients “shall
mean number of client agreements in force at any point of time”.

I am sceptical about this move. Will this be beneficial to clients? Advisors like to compare themselves to doctors once too often. So, if you need a doctor, would you refer to a full-time specialist or a part-timer?

My reservations aside, many may wish to become advisors but may be unable to leave their jobs. So, this may be beneficial for them. We asked some SEBI registered fee-only advisors from our curated list about their views on this development. This is what they had to say.

SEBI RIA Abhishek Kumar, Website: sahajmoney.com

This is a welcome step from SEBI as this would allow prospective RIAs to test the waters before taking the plunge into full-time investment advisory. When I started SahajMoney in 2017, I had to leave my full-time job to comply with SEBI RIA regulations. However, I urge SEBI to ensure that future part-time RIAs fully comply with SEBI RIA regulations, just like full-time RIAs, so that investors are not taken for a ride by non-serious players.

SEBI RIA Upasana Mondal, Website: dreamblueprintz.com

Allowing part-time investment advisors could undermine the consistency and depth of advice that clients receive, as part-time roles may lack the dedication required to stay fully informed and responsive to market changes. This shift risks compromising the quality of guidance, as advisors juggling multiple responsibilities might not provide the thorough analysis and timely support essential for effective investment strategies. For clients seeking reliable and focused advisory services, the assurance of full-time commitment remains crucial to achieving their financial goals.

SEBI RIA Ajay Pruthi, Website:  plnr.in

SEBI’s proposed rules allow part-time Registered Investment Advisors (RIAs) to have good intentions, aiming to provide more flexibility and increase the availability of advisory services. However, the practicality of these rules is questionable for the following reasons:

  1. Conflict of Interest: There are concerns about potential conflicts of interest and whether part-time advisors can maintain the same level of fiduciary responsibility as full-time RIAs.
  2. Investor Protection: While the move could democratize access to financial advice, robust regulatory oversight will be crucial to protect investors’ interests.
  3. Holistic Knowledge: Advising on finances requires a deep understanding of financial products across segments. It’s doubtful that part-time advisors can devote the necessary time to gain this knowledge, despite possible exceptions.
  4. Analogy with Healthcare: Similar to how we trust a doctor over a chemist for complex health issues, clients need advisors with comprehensive knowledge for their financial well-being.
  5. Long-Term Impact: In the long run, this could damage the reputation of investment advisors. With new regulations requiring minimal experience and just a simple exam, investment advisors may proliferate, potentially lowering the quality of advice.

SEBI RIA Preeti Zende, Website: apanadhan.com

SEBI has come up with a recent consultation paper regarding some changes proposed for the RIA regulation. One of the very peculiar move is to allow part-time RIA practice. With this move, any other professional can also take up the RIA profession as part-time job.

In my opinion, the RIA profession should not be just looked at as one of the professions of livelihood. It is more about serving people with the right attitude, guiding the common investor with honesty and integrity and running the business with a fiduciary approach. All this needs a lot of dedication and commitment from a person who is passionate about this service. One has to keep the monetary angle sideways and serve the common investors without conflict of interest.  One can do this only when he/she thinks about this profession all the time and gives 100% of time, attention and effort for the same and offers the clients an optimum quality of work.

With part-time RIA, there is a possibility that the quality of advisory service can be diluted. Part-time advisors may take things lightly, and this becomes just one of the side hustles for many other professionals who are already more interested in their original profession.

Investors will also be confused about this dual registration. They can be hit badly if the service provided under part-time registration is not up to the mark or is compromised just because of a lack of seriousness.

Every discussion needs a context, and the context here is that SEBI wants to radically increase the number of Investment Advisers. This directions has been signaled in multiple sessions. After more than a decade, just 1000 individuals/entities have a valid IA license. To increase the number, SEBI has proposed drastic changes in the education and experience criteria. If this proposal gets implemented, a large number of people would be eligible to apply for IA license. Enabling part-time IAs is an extension of this. A professional who otherwise meets the criteria, is committed to providing fiduciary advice, but is unsure of the viability of practicing as an IA, can take the part time IA license. They would have appropriate limitations – number of clients, etc.. But they would be able to stand with other IAs and work with clients. Hopefully they would be able to ascertain their preparedness to become a ‘full time’ IA and migrate over time. The possibility of doing this part-time, without having to stop their current work/profession, would expand the pool of qualified people.

A flip side is that this may invite ‘not very serious’ applicants; hopefully, the application and approval process would be able to filter them out.

An interesting fact. A SEBI person gave an example of an IIT professor who would be interested in being a part-time IA. A lot of people assumed that this was a reference to the editor of freefincal! But others who were in the meeting clarified that the reference was to someone else.

Now, over to you. Would you engage with a part-time Sebi registered investment advisor or research analyst?

Do share this article with your friends using the buttons below.


🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 5000+ users!


Use our Robo-advisory Tool for a start-to-finish financial plan! More than 1,000 investors and advisors use this!


New Tool! => Track your mutual funds and stock investments with this Google Sheet!


We also publish monthly equity mutual funds, debt and hybrid mutual funds, index funds and ETF screeners and momentum, low-volatility stock screeners.


Follow Freefincal on Google News
Follow Freefincal on Google News
Subscribe to the freefincal Youtube Channel. Subscribe button courtesy: Vecteezy.
Subscribe to the freefincal Youtube Channel.
Follow freefincal on WhatsApp Channel
Follow freefincal on WhatsApp

Podcast: Let’s Get RICH With PATTU! Every single Indian CAN grow their wealth! 

Listen to the Lets Get Rich with Pattu Podcast
Listen to the Let’s Get Rich with Pattu Podcast

You can watch podcast episodes on the OfSpin Media Friends YouTube Channel.

Lets Get RICH With PATTU podcast on YouTube
Let’s Get RICH With PATTU podcast on YouTube.

🔥Now Watch Let’s Get Rich With Pattu தமிழில் (in Tamil)! 🔥


  • Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
  • Have a question? Subscribe to our newsletter using the form below.
  • Hit ‘reply’ to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.

Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!


About The Author

Pattabiraman editor freefincalDr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.


Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market condition is!! Watch the first lecture for free!  One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.


Our new course!  Increase your income by getting people to pay for your skills! More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!   


Our new book for kids: “Chinchu Gets a Superpower!” is now available!

Both boy and girl version covers of Chinchu gets a superpower
Both the boy and girl-version covers of “Chinchu Gets a superpower”.

Most investor problems can be traced to a lack of informed decision-making. We made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, what would it be if we had to groom one ability in our children that is key not only to money management and investing but to any aspect of life? My answer: Sound Decision Making. So, in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parents plan for it, as well as teaching him several key ideas of decision-making and money management, is the narrative. What readers say!

Feedback from a young reader after reading Chinchu gets a Superpower (small version)
Feedback from a young reader after reading Chinchu gets a Superpower!

Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. – Arun.

Buy the book: Chinchu gets a superpower for your child!


How to profit from content writing: Our new ebook is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!


Do you want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool!


We publish monthly mutual fund screeners and momentum, low-volatility stock screeners.


About freefincal & its content policy. Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)


Connect with us on social media


Our publications

You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingPublished by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.


Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.


Your Ultimate Guide to Travel

Travel-Training-Kit-Cover-new This is an in-depth dive into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically, with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)


 



RELATED ARTICLES

LEAVE A REPLY

Please enter your comment!
Please enter your name here

- Advertisment -
Google search engine

Most Popular

Recent Comments