Distributors not interested to take up the investment advisor roles
It seems that the distributors are not keen on wearing the hat of investment advisors. Fourteen months after the investment advisors’ regulations came into effect, not many distributors have come forward to register themselves as advisors.
The number of investment advisors as of May 2014 stood at 156, as per SEBI data which has grown in a snail pace. Independent financial advisors (IFA) are clueless on many aspects and the ambiguity has resulted in motivating less number of distributors to take up the investment advisor’s role. Vinod Jain an IFA mentioned that some IFAs want to get registered as investment advisors and also continue to do execution-only distribution business. But there is no clarity on how to split the business.
Jain mentioned that there is more responsibility on the shoulders of the investment advisors as compared to the distributors. In the earlier execution-only regime, the onus laid with clients who signed documents saying they were responsible for the transaction and the distributors did not have any responsibility if the client lost money in the investment. However in the advisory model, the advisor is charging fees and is responsible for decisions taken for and on behalf of the clients. Also as per the Sebi’s compliance requirements, each and every recommendation made to the client needs to be documented which increases paper-work for the advisors.
A number of corporate houses like Anand Rathi Financial Services, Barclays Securities, ICICI Securities, ICICI Venture Funds Management and Edelweiss Investment Adviser have registered as investment advisors. However, market regulator Sebi’s move to hike fees for corporates and LLPs might prove to be a party pooper. Registration fees for this category has been hiked five times to Rs 5 lakh from Rs 1 lakh earlier, while application fees have been raised to Rs 25,000 from Rs 5,000 earlier.
Source- The Financial Express
Anand Rathi Financial Services, Barclays Securities, ICICI Securities, ICICI Venture Funds Management, Independent financial advisors, investment advisors
