Introduction
Investing in the stock market can be an excellent way to build wealth, but also challenging to navigate. With so many advisors offering their services, knowing which advice to follow and who to trust can be challenging.
The best way to ensure that you are making informed investment decisions is by seeking the guidance of a professional investment advisor, particularly one who is SEBI-registered.
Investment advice is any guidance related to investing in, buying, selling, or dealing in securities or investment products. This advice can be provided through various means for the client’s benefit, including financial planning.
Contrary to popular belief, financial advice isn’t exclusively for the affluent. Everyone can benefit from professional investment advice regardless of their economic status. It helps individuals identify and achieve their life goals without encountering significant obstacles.
Who’s a SEBI Registered Investment Advisor?
A SEBI-registered investment advisor is a person or entity that provides investment advice to clients for a fee. They can be either a sole proprietor or a corporate body. Certain professions or individuals are exempt from registering as financial advisors under regulation 4 of IA Regulations, provided they meet specific conditions.
These include insurance agents, stock brokers, sub-brokers, fund managers, advocates, solicitors and law firms, pension advisers, mutual fund distributors, and portfolio managers.
A SEBI-registered investment advisor must need two certifications: NISM-Series-X-A: Investment Advisor (Level 1) and NISM-Series-X-B: Investment Advisor (Level 2).
These certifications demonstrate their expertise and qualifications in the field, ensuring they provide their clients with the highest quality advice. By seeking the guidance of a SEBI-registered investment advisor, you can make informed investment decisions and achieve your long-term financial goals.
What is the concept of Fee-only advice?
Fee-only advice is a term used to describe investment advisors who are registered with the Securities and Exchange Board of India (SEBI). These advisors provide advisory services to their clients without any conflict of interest. They do not sell or receive a commission on any investment products recommended to their clients. Instead, the only income they receive is the fee charged to the person receiving the advice.
By not having a financial incentive to push specific investment products, these advisors can provide unbiased advice that is solely in the best interest of their clients. This allows them to create a personalized and tailored plan that matches the individual needs of each client. This approach is more transparent and fairer, and eliminates any potential conflicts of interest that may arise when advisors receive commissions on investment products they recommend.
Obligations for a SEBI Registered Investment Advisor in India
SEBI-registered investment advisors have certain obligations that they must follow. These obligations are mandatory and help ensure that the advisor acts in the best interest of their clients. Some of these obligations include:
1. Acting in a fiduciary capacity and disclosing any conflicts of interest.
2. Being honest and fair and acting in the best interests of their clients.
3. Maintaining a professional relationship between their work as an investment advisor and other activities.
4. Providing advice based on their client’s needs and risk-taking ability.
5. Complying with general obligations and responsibilities, such as maintaining records and disclosing client information.
In comparison, non-registered investment advisors, such as agents of other investment vehicles, may have conflicts of interest when providing advice. They may prioritize selling certain products they benefit from and may not have the necessary qualifications or oversight. This is why it is recommended to work with a SEBI-registered investment advisor who provides fee-only advice.
So, here are we to discuss the benefits of SEBI Registered Investment Advisors over Non-Registered Advisors.
1. Registered investment advisors are uniquely responsible for prioritising their clients’ financial well-being above their interests. This is called fiduciary care, and it’s a benefit of working with them.
2. They provide unbiased and impartial guidance because they have a comprehensive understanding of the wide range of investment products available. They also have better qualifications since SEBI has some basic qualification requirements before granting the title of a registered investment advisor.
3. The Securities and Exchange Board of India (SEBI) has established stringent regulatory requirements for registered investment advisors. These requirements are designed to protect investors and maintain the integrity of the financial markets. If you have a complaint, SEBI has a web-based centralized grievance redress system called SEBI Complaint Redress System (SCORES) to ensure prompt and fair resolution.
4. Registered investment advisors must keep proper accountability, i.e. books showing the process, compliance, and suitability of advice. They are audited every year in these matters.
5. Online consultations with investment advisors are a great option for people making straightforward or low-value investment decisions. They are generally affordable and take less time. You can check the advisor’s credentials and registration on the SEBI website to confirm their authenticity.
You may have taken financial advice from agents in the past. While not all agents are biased, dealing with a fee-only advisor provides a client-centric point of view that you don’t get with agents.
About Equity Pandit
Established in 2005, Equity Pandit has become one of India’s leading equity research companies and is a SEBI-registered advisory firm in India. We were pioneers in bringing equity research based on technical analysis to the Internet in India. The Economic Times’ prestigious Best Innovation of the Year award has recognised our commitment to innovation, further solidifying our position in the industry.
Mr. Abhishek Parakh is the company’s Founder, CEO, Managing Director, and SEBI Registered Investment Advisor in India. He is also a member of the National Council of Capital Markets, representing the Investment Advisory Industry.
His expertise is underscored by his national and international certifications in Finance and Technical analysis. His contributions have been recognised with numerous awards, including India’s 500 fastest-growing CEO Awards 2017 under the SME category, the 50 Most Influential Financial Services Marketing Professional award by CMO Asia, and being named one of the 100 Top BFSI Leaders by ET Now and World BFSI Congress.
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