Despite having around 3.4 crore unique mutual fund account holders and 6 crore unique demat accounts, India has just 1300 registered investment advisors (RIAs) certified by the Securities and Exchange Board of India (SEBI) to share their advice with investors with regards to financial products and services. This alarming statistic highlights the urgent need for more RIAs in the country to cater to the growing number of retail investors.
RIAs are investment advisors who are certified by the capital markets regulator SEBI to share their advice with investors with regards to financial products and services. SEBI chief clarified that RIAs can only charge investment advisory fees from clients and cannot offer unregulated products like EB-5 investments. This regulation ensures that investors receive guidance from qualified professionals who adhere to strict guidelines set by SEBI.
Madhabi Puri Buch, whole-time member at SEBI, stressed on not just adding more investment advisers to the ecosystem but also having them registered with the market regulator. "We require investment advisors to register. There are a large number, some 35 per cent of investment advisors, still not registered,” Buch said. This indicates a gap in compliance within the industry that needs to be addressed promptly for investor protection.
Different segments in the market should be regulated differently, and SEBI is open to a segmented approach to draft such a regulation. This tailored approach will ensure that specific needs of different investor groups are met effectively, enhancing overall market integrity and investor confidence.
With the rise in the number of retail investors over the years, the time is right to crack down on the state of investment advisory in India. The onset of the COVID-19 pandemic has prompted many Indians to venture into the stock market, embracing investment as a means of savings. This increased participation underscores the importance of having more registered investment advisors to guide investors through their financial decisions.
Despite a prolonged bull market, a boom in both investments and investors, strangely, the number of registered investment advisors has not seen a significant increase. This imbalance raises concerns about the quality of financial advice available to investors and the need for stricter regulation to ensure investor protection.
Overall, SEBI's push for more registered investment advisors in India is a step in the right direction towards strengthening the financial advisory landscape and safeguarding the interests of investors. By promoting compliance and professionalism within the industry, SEBI aims to enhance investor trust and foster a more transparent and secure investment environment.
