Contents
- Financial Advisor’s Many Roles
- Financial advisor’s role with Mutual funds
- Qualification to be a Financial adviser in India
- Process of registration as a Financial Advisor
- Fees to be paid
- Documents required to become Financial Advisor
- Compliance for a financial advisor
- Fees from Clients
- Grievance Redressal
- Distribution activities by Registered Investment Advisor(RIA)
A financial advisor is a professional who suggests and provides services to the clients on the basis of their financial situation. In many countries, financial advisors have to go through specific training. And they hold a license for providing advice. Financial advisers advise their clients about various financial products and services. It all depends on the licenses they hold and the training they have had.
Financial Advisor’s Many Roles
The financial advisor can also be called an educator. One of the advisor’s task is helping you in understanding what is involved in meeting your future goals. The education process includes detailed help with financial topics. At the beginning of your relationship with a financial advisor/mutual fund agent, the topics will be budgeting and saving. With the advancement in your knowledge, the advisor will start to assist you in understanding the complex investment, insurance, and tax matters. Mutual Fund Distributors acts as a mediator between the client and mutual fund agencies.
Step one in the financial advisory process is to understand your health financially. You can’t accurately plan for the future without knowing where you are standing today. Usually, you will be given a detailed written questionnaire to complete. Your answers help the advisor in understanding your situation and make sure you are not overlooking any important information.
Financial advisor’s role with Mutual funds
Mutual funds have become a popular investment option in recent years. Many people are preferring to invest in mutual funds as they can get higher returns from there. The uncertainty about them has reduced, thanks to intervention from government bodies like SEBI.
More and more people are flocking towards mutual fund investments. However, it also calls for a certain level of awareness from the investor’s part. So, it is important to know your investment goals and risk profile that can help you choose a fund accordingly. This is where a mutual fund agent or financial advisor can help you.
Mutual fund agent is qualified professionals who can understand the purpose and nuances of a fund. Their job includes figuring out which fund matches the investor’s interest. Thus, the person should have a valid certification from the National Institute of Securities Market(NISM). The qualifying examination is ‘NISM Series V-A: Mutual Fund Distributors Certification Examination’. After clearing this exam, AMFI issues an ARN Number.
To read more about Mutual funds :
Qualification to be a Financial adviser in India
If you want to apply for registration as an Investment Adviser in India, you should have the following minimum qualifications:
(1) A professional qualification or post-graduate degree or postgraduate diploma in finance, accountancy, business management, commerce, economics, capital market, banking, insurance or actuarial science.
(2) A certification on financial planning or fund from (a) NISM or (b) from any other organization or institution including Financial Planning Standards Board India (FPSB) or any recognized stock exchange in India (NSE or BSE- SENSEX)provided that such certification is accredited by NISM.
In other words, a postgraduate in finance-related topics or a graduate in any discipline with 5 years experience in the financial sector can pass the following 2 examinations by the National Institute of Securities Markets (NISM) and apply to SEBI for registration as an Investment Adviser.
- NISM – Series-X-A: Investment Adviser (Level-1) Certification Examination
- NISM- Series – X-B: Investment Adviser (Level-2) Certification Examination
Process of registration as a Financial Advisor
You can get the details from the SEBI website. Please see the relevant link giving the details.
You have to apply to SEBI in Form A (attached below)
Fees to be paid
If you are applying as an Individual or Partnership Firm, the application fee is Rs. 5000/-. Otherwise, it is 25,000. Once your application is approved, you have to pay the registration fee of 10,000 if you are applying as an Individual or partnership firm. For others, the registration fee is 5 Lakhs.
Documents required to become Financial Advisor
You have to submit the following documents (self-attested) along with application in Form A.
- identity proof(Pan Card, aadhar card, passport, voter id, etc.)
- Proof of address( aadhar card, utility bills, passport)
- Proof of qualification
- Experience Certificate in case of graduates
- CIBIL Score
- Net worth certificate from a Chartered Accountant
- Income Tax Returns for the last 3 years
- Application fee of 5000/25,000 as applicable
- Various declarations as the case may be.
You have to send these documents to the Regional/Local office of SEBI in your area. You also have to send a soft copy to SEBI.
SEBI will scrutinize your application and if there is any problem, they will point out so that you can correct them. Once your application is approved, you will get an intimation to pay the registration fee. You can make the fee payment (10,000 or 5 Lakhs) at this stage. On receipt of the fee, you will get registration as an Investment Adviser/mutual fund agent.
Now you can start selling Equity funds, Debt, multi-cap, income fund, small-cap and mid-cap equity funds, large-cap oriented equity funds, etc.
The registration is valid for 5 years and the same process is to be followed for renewal. The fee structure also will be the same for renewal. The application for renewal must be given to SEBI 3 months before the expiry of registration.
Compliance for a financial advisor
An investment adviser which is a body corporate or a partnership firm is required to appoint a compliance officer who shall be responsible for monitoring the compliance by the investment adviser. In the case of an individual RIA, he himself is responsible for such compliance. Yearly audit by a Chartered Accountant is required to ensure compliance.
An investment adviser shall act in a fiduciary capacity towards its clients and shall disclose all conflicts of interests as and when they arise. He shall act honestly, fairly and in the best interests of the clients.
Fees from Clients
SEBI Regulation is not fixing any scale of a fee to be charged by the Investment Adviser from clients. It is as per the agreement between the client and the investment adviser. Further, an investment adviser shall ensure that fees charged to the clients are fair and reasonable.
Grievance Redressal
SEBI has launched a new web-based grievance redressal system called SEBI Complaint Redress System (SCORES). Investors can lodge their complaints at http://scores.gov.in. On receipt of complaints, SEBI takes up the matter with the concerned investment adviser and follows up with them for redressal.
Distribution activities by Registered Investment Advisor(RIA)
If you are a SEBI registered Investment adviser, you cannot sell any financial products to your clients and earn a commission. This rule is to ensure that you recommend the best-suited products to the client without any conflict of interest.
But RIAs other than Individuals can have a separate division for distribution! The adviser is required to segregate distribution and execution services. The investment advisory has to be provided by a separately identifiable department or division or through a subsidiary. Further, such distribution or execution services can only be offered subject to the following conditions: The client shall not be under any obligation to avail the distribution or execution services offered by the investment adviser or its affiliates. The investment adviser shall maintain arm’s length distance between its activities as investment adviser and distribution or execution services.
An investment adviser shall disclose to his client, any consideration by way of remuneration or compensation or in any other form whatsoever, received or receivable by him or any of his associates or subsidiaries for any distribution or execution services
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