The Securities and Exchange Board of India (SEBI) has announced proposed regulatory changes to streamline the certification process for fee-only investment advisors and research analysts. The goal of these changes is to increase the number of professionals who advise people on investments and financial management. This move is a component of SEBI’s larger initiative to allay worries about the strict entry restrictions that had previously impeded the expansion of this industry.
Investment advisers registered with SEBI have long said that despite the growing need for financial advising services from India’s expanding investor population, the high entrance criteria deterred many from entering the field. Rather, a growing number of would-be advisers have chosen to work as mutual fund distributors, where entry has been made simpler by fewer restrictive standards.
Unlike mutual fund distributors, who take a commission on the sale of mutual fund schemes, fee-only investment advisers charge a straight fee for their services, much like other professions like physicians. Ultimately, clients bear this expense. It is anticipated that SEBI’s suggested modifications will address the growing need for objective financial advice and facilitate entry for new professionals into the advising area.
One of the most significant changes that are being suggested is the decrease in educational requirements. Rather than the prior need for a postgraduate degree, candidates will now just need a graduate degree. Furthermore, passing the National Institute of Securities Markets (NISM) test once will no longer be necessary for certification; going forward, renewals will just need an update on current events.
In addition, SEBI suggests five-year minimum work experience criteria as well as the minimum net worth criterion. As an alternative, advisers will have to keep a deposit that grows in line with their clientele and income, more closely resembling the mutual fund distributors’ certification procedure.
A wider spectrum of investors should have more access to high-quality financial advice as a result of these improvements, which should also make it simpler for prospective advisers to enter the field.
