Market regulator Sebi proposals seen boosting ultra low advisor count

Less than 900 advisors for 100 mn investors

The investment industry and advisors have welcomed the proposals by the Securities and Exchange Board of India (Sebi) to relax the entry barriers and compliance for investment advisors and research analysts.

The market regulator on Tuesday had floated a 37-page consultation paper reviewing the current norms on registration, eligibility, and periodical requirements for registered investment advisors (RIAs).

The proposals include removing the minimum net-worth requirement, minimum experience required, need for re-certification every three years, and certain other educational requirements.

The industry believes that Sebi’s proposed steps will help increase the dwindling number of investment advisors. RIAs, who were in the working group for the co-creation of this consultation paper, had pointed that certain compliance requirements were onerous and made the practice tedious.

“As our markets continue to grow, the number of advisors has to grow exponentially to help new investors. If these proposed changes become final, it'll go a long way toward increasing the number of individuals wanting to become advisors,” Nithin Kamath, co-founder of Zerodha wrote on X on Wednesday.

He added that one of the biggest challenges for the Indian markets is the lack of advisory ecosystem which has not grown with the pace proportional to the rising number of investors.

There are around 900 registered investment advisors and the total has gone down in the last few years. On the other hand, the number of investors has surged beyond 100 million. Further, while there are over 2.7 lakh mutual fund distributors, the number of insurance agents stands way beyond at 2.7 million, added Kamath.

Other industry players said that Sebi’s move will help add more participants through the formal route and even help mutual distributors who want to take the registration.

The market regulator has also proposed to allow registrations as ‘part-time investment advisors’.

“The applicant shall be considered eligible for registration as part-time IA/RA, if he is engaged in activity/business/employment permitted by any financial sector regulator or an activity under the purview of statutory self-regulatory organisations such as Institute of Chartered Accountants of India (‘ICAI’). For example, tax planning by CA, insurance agent having license from IRDA,” the paper noted.