Shrinking number of Sebi-registered advisers means fewer options for investors seeking conflict-free advice Financial advice is key to disciplined and prudent investing, but most people are unaware of the right kind of advisers.
Sebi-registered investment advisers (RIAs), who charge a fee directly from clients, instead of commissions from product manufacturers like mutual funds or insurers, offer unbiased, tailor-made advice. Yet, their numbers have been shrinking—from 1,350 a couple of years ago to just 962 now.
That means fewer options for investors seeking conflict-free advice, while commission-driven distributors remain far more accessible.
Last week, the Securities and Exchange Board of India (Sebi) cleared proposals to ease entry barriers and improve ease of doing business for these registered advisers.
Industry stakeholders say the changes do not significantly improve the situation. The biggest pain points remain delays in processing applications and renewals, often without clear communication. Advisers are left in limbo or forced to hire compliance officers just to navigate the system.
In 2021, to reduce its operational burden and introduce specialized monitoring, Sebi delegated day-to-day supervision of RIAs to BSE Administration and Supervision Ltd (BASL), a subsidiary of BSE. All RIAs must now obtain BASL membership in addition to a Sebi registration, making the process more complex.
Take the case of a Mumbai-based certified financial planner (CFP) with over two decades of experience. Convinced about the long-term potential of conflict-free advisory, he applied for the licence in March. Nearly seven months later, the process drags on. While Sebi gave an in-principle nod on 1 September, paperwork continues, leaving him unclear about next steps.
“I hired a compliance officer in December to do the paperwork. By February, we sent documents to BASL. But I needed a CIBIL report that took months. Finally, all papers were given to Sebi’s adjudicating officer on 3 July after BASL approval,” he said, on condition of anonymity.
Despite repeated follow-ups, the process hasn’t closed. “After several attempts, I got in-principle approval on 1 September. Now I need a virtual account with Sebi and BASL but there are no details on how to proceed and Sebi isn’t replying,” he added.
Meanwhile, a Delhi-based financial planner, who did not want to be identified, applied for licence renewal well in advance but received silence from both Sebi and BASL.
“I entered the RIA model because I believe in unbiased advice. Yes, the fee-paying culture is limited, especially in North India, but smart clients understand. I want to continue, but endless follow-ups with unresponsive regulators hurt my business. My renewal is pending, and I haven’t collected a penny from clients in two years. I may have to give up the licence,” he said.
The Mumbai-based planner is also in a limbo as he doesn’t want to onboard clients on a commission model when his advisory licence is “around the corner. “I need to run my family. I have savings, so I’m surviving, but others may not manage the transition,” he said.
While Sebi has reduced paperwork—removing the need for CIBIL reports, proof of address, net worth statements and infrastructure declarations—industry stakeholders say accountability and communication are missing. “There is no well-defined timeline of how long a process will take or within what period Sebi must respond,” said the Mumbai-based planner.
Registered advisers, being Sebi-regulated, have to follow strict compliance. This is important to protect investor interest. However, compliance is so strict that individual RIAs and mid-sized corporate advisory firms find it difficult to do so due to a lack of resources and funds.
Pune-based adviser Zafar Shaikh chose to surrender his licence, frustrated by frequent regulatory changes. He had applied in 2018, got the licence in 2019, and gave it up in 2022. “Getting clients was not as much of an issue as keeping up with changing regulations,” he said. “The regulator does not even send direct communication to the RIA community. You need a full-time compliance officer to stay updated with changing requirements. Corporate RIAs can afford that, but it’s not possible for individuals.”
Would he consider reapplying, given the recent relaxations? He’s clear: “Not at all. Regulatory uncertainty persists. Some RIAs I know painstakingly completed Master’s degrees in Finance when the eligibility criteria were revised in 2020. In 2024, that requirement was removed, and this year it has been relaxed further. How do we plan long-term business in this environment?”
Vikram Biswas, co-founder of Lookinglaz Technologies, a Bengaluru-based RIA firm, says a back-of-the-envelope math tells us they burn around 15-20 hours monthly on compliance and other regulatory work and spend about Rs 2.5-3 lakh to meet Sebi norms.
Ajay Pruthi, founder of PLNR, a low-cost fixed-fee advisory platform, takes a different stance, saying compliance is vital.
“I don’t buy the logic that Sebi should relax compliance because distributors, insurance agents, or wealth managers have it easy. We’re in the fiduciary business where a certain level of checks and balances is needed. Yes, it requires money, but let us take it as a business expense,” he said.
He also said the RIAs quit if they don’t get clients in the first few years, and they want only “rich clients”.
Some compliances require relaxation. Harsh Roongta, founder of Fee Only Investment Advisers, an RIA firm, highlights a few others: Record-keeping for every client interaction and storing it for years, repeated PMLA/KYC updates, approvals to marketing material, among others, demand time and money. “These should go, especially for individual RIAs,” he said.
Be mindful of who you take financial advice from. While RIAs give full-fledged financial planning, regulations still call them ‘investment advisers’. “Distributors offering incidental advice brand themselves as financial planners but remain outside Sebi’s purview,” said Manikaran Singal, managing director, Good Moneying Wealth Planners.
Conflict-free advice comes from RIAs, who charge a fee. Though many are seen as catering only to high net worth individuals, many also offer low-cost plans for the masses. As more investors adopt fee-based advisory, the RIA numbers will grow, helping the industry mature.