The Securities and Exchange Board of India's (SEBI) proposal to regulate investment advisers through a Self-Regulatory Organisation (SRO) will pave the way for unbiased advice to retail investors, but the cost of the advice may go up.
"SEBI's proposal for investment advisers will bring discipline in the field of financial advisory and will promote the culture of financial planning in the country," said Ranjeet Mudholkar, vice-chairman and CEO, Financial Standards Planning Board India, an organisation of financial planners, which has shown interest in becoming an SRO.
The SEBI, on Monday, released concept paper on regulation of investment advisers in which it proposed that entities (including banks and fund managers) and persons who act as investment advisers would have to be registered with an SRO. SRO's duty would be to set up minimum professional standards.
The regulator said that investment advisers should receive fees only from the investors and not from the companies.
"Investment advisers will have to pay registration fee and annual fee. Apart from that adviser will also have to maintain records of the advise given, which will increase operation cost," said Veer Sardesai, certified financial planner and chief executive of Sardesai Finance. "The increase in cost would be passed on to the customer."
Experts believe that the proposal would improve the quality of service for the investors as the regulator has proposed higher professional qualification such as MBA, CA from a recognised institute or at least 10 years of relevant experience for investment advisers.
"Higher qualification will ensure that only serious and qualified person will enter the investment advisory, which means better quality of service to the investors," said Vishal Dhawan, founder, Plan Ahead Wealth Advisors.