How to become an RIA (Registered Investment Advisor)?

The Indian financial market has become one of the best places to invest and multiply wealth over time. The unprecedented interest is due to the market’s potential to cater to almost every financial goal of the investors. If investors want to make quick profits, they can invest in growth stocks that rise in price rapidly. However, the financial markets tend to react to factors such as economic, financial, global etc.; the value of the investments may fluctuate. In a case where the market reacts negatively to the market factors, investors can be forced to incur losses on the invested amount. Thus, if investors want to invest their capital in less volatile stocks and earn regular income through dividends, they can invest in defensive stocks that steadily rise over time without much price fluctuation. 

Hence, investors need to have deep financial knowledge about such market factors to ensure their investments remain profitable. Since a majority of the investors are retail, it becomes complex for them to attain such financial knowledge. This is where an RIA (Registered Investment Advisor) helps investors immensely. Such advisors ensure that the investment decisions taken by their clients are ideal and transactions are transparent.

This article will help you understand everything there is to know about registered advisors and how to become a registered investment advisor in India.

Who is an RIA (Registered Investment Advisor)?

They are registered specialists that provide clients with financial advice and help them achieve their goals in life. For their clients, they conduct financial preparation, which is the method of achieving their life goals through proper financial management. Life goals can include owning a home, investing for the education of kids, retirement planning or estate planning. A big part of the role of a financial advisor otherwise called an RIA, is to make customers feel relaxed and create confidence in them. They have to keep up with the latest business events and have to provide their customers with impartial advice.

Understanding RIA (Registered Investment Advisor)

The Indian financial market includes numerous financial instruments that can allow investors to make good profits, be it in the short term or long term. However, the investments need to be based on extensive analysis of the security and other market research. If the investments are made without due diligence, it is more than likely for the investors to incur heavy losses.

But, is it necessary for every investor to learn about every key factor included in the financial market? The answer is no. It is not possible for investors who do not have exposure to the financial market to have such extensive financial knowledge before they start investing. To ensure such investors’ are not restricted from investing in the financial markets and can achieve their financial goals, an RIA (Registered Investment Advisor) was introduced.

An RIA (Registered Investment Advisor) is an expert on the financial market and every financial instrument included within. They are well equipped to analyse the financial conditions of the clients and recommend ideal investment opportunities. For example, if an investor wants to save for retirement, such advisors would recommend securities that are less volatile and can give high returns over time without losing value. However, if an investor wants to make profits in the short term, an investment/financial advisor who is registered would recommend securities that are slightly volatile but can offer better returns.

An RIA (Registered Investment Advisor) is registered with the Securities and Exchange Board of India. These advisors are licensed to assist their clients in providing financial advice concerning various financial instruments. In India, an investment manager who is registered plays multiple roles such as financial planner, tax-saving advisor, and portfolio manager. They usually charge a flat fee from the clients for the financial advisory services, but some RIAs may charge some percentage of the assets they manage of their clients as a commission.

 

Eligibility to Become an RIA (Registered Investment Advisor)

Being a registered advisor also comes with a lot of responsibility, as with any other specialist. They handle other people’s finances. A good financial planner may be a person who has the experience, desired passion and an ever-growing interest. If you know how to become an investment advisor in India, the eligibility is listed below:

  • Education:

    Every firm has its own criteria for eligibility. Candidates can review any company’s job description to know the minimum requirements for the job. Some businesses need candidates with a master’s degree in a finance-related stream, whereas brokerage firms can employ candidates based on their bachelor’s degree results.

  • Experience:

    As most individuals tend to take advice from an experienced financial planner, before going forward, candidates should obtain some experience. By applying as an intern, they can start their career so that they can become acquainted with all the funding-related terminology and strategies. This will also assist them in acquiring some field experience.

  • Skills:

    They must also possess certain additional skills in addition to the academic requirements. It will allow candidates to stand ahead of the other candidates by getting certain skills related to financial management. Some of the significant abilities are interpersonal skills, communication skills, organisational skills, enthusiasm and customer service skills.

The Process of Becoming an RIA (Registered Investment Advisor) in India

  • Fee-only advisors have to be registered as an Investment Advisor (RIA) with SEBI

  1. Certification accredited by the National Institute of Securities Markets (NISM) – like Chartered Wealth Manager (CWM)

  2. CWM certification is provided by AAFM India and approved by AAFM US.

  • Commission-only advisor has to get certain certifications such as

  1. Insurance IRDA Examinations IRDAI IC 38

  2. Certification accredited by the National Institute of Securities Markets (NISM) – like Chartered Wealth Manager (CWM)

  3. CWM certification is provided by AAFM India and approved by AAFM US

You might also like: Financial Advisor Costs in India

Who needs to register as an RIA (Registered Investment Advisor)

Any financial entity, be it a person, firm or group of firms can become an investment/ financial advisor in India and start a business to provide financial investment advice to people who are not well-versed with the financial instruments. The process of how to become a registered investment advisor in India requires any individual, partnership firm, sole proprietor, company or body corporate to apply for the licence. However, if the clients of an RIA (Registered Investment Advisor) exceed 150, they are mandated to register with the Securities and Exchange Board of India.

The following entities are exempted from registering with SEBI after applying to become an RIA (Registered Investment Advisor):

  • Pension advisors licensed by the IRDAI.

  • Insurance brokers or agents licensed by the IRDAI.

  • Mutual Fund distributors licensed by the AMFI.

  • Members of the Institute of the Cost and Works Accountants of India, Institute of Company Secretaries of India and Institute of the Chartered Accountants of India.

SEBI Regulations for an RIA (Registered Investment Advisor)

The Securities and Exchange Board of India understands that the role of such advisors is pivotal in the Indian financial market. However, as there is personal capital of clients involved along with numerous financial transactions, SEBI has made multiple regulations to be adhered to by an advisor. For individuals to be eligible, they need to have a net worth of Rs 5 lakhs.

The net worth requirement for partnership firms and companies is Rs 50 lakhs for being an RIA (Registered Investment Advisor). They should have a NISM level 2 certification and a professional qualification degree in related subjects such as finance, banking, capital markets etc. Furthermore, as per SEBI, an advisor can charge a fee of 2.5% of Assets under Advice per annum per family or a fee of Rs 75,000 per annum per family as a flat fee.

Finally, SEBI has mandated all advisors to maintain an agreement regarding the rendered investment advisory services. The motive behind the agreement is to create transparency between the client and advisor by specifying the agreed terms, fees and transactions.

What Is The Scope Of Registered Financial Advisors In India?

  • Personal RIAs (Registered Investment Advisors) are not just for people who are rich. Without any anxiety, every person can benefit from objective support to systematically develop, grow, accumulate and use wealth to fulfil one’s personal goals, family goals and other lifestyle goals. Such advisors will guide people to achieve their ultimate goal of happily enjoying their retirement lives without sacrificing living standards.

Following advice is provided by investment/financial advisors who are registered:

  • Savings systematically

  • Control of cash flow

  • The management of debt

  • Allocating assets for investment

  • Risk management via insurance planning

  • Tax methods to raise the investment surplus

  • Distribute residual capital by the preparation of estates.

For people with good communication skills combined with knowledge of how the financial service industry works, a financial advisory is a perfect profession. One could work for a bank, insurance company, brokerage house or have one’s own practice as an investment planner/advisor.

 

Conclusion

In addition to feeling good about providing sound advice and creating a strong financial basis for their clients, you can reap other incentives for themselves, such as a high salary, flexibility in the work schedule, and control over their practice. Evaluating the pros and cons of this career will help you make a powerful decision as to whether or not this is the right one for you.

Financial advisor helps you ensure that along with your company finances, your personal finances will be in good order. In your business and personal life, these professionals play an important role and ensuring good communication and teamwork will be crucial to your long-term success. Always note that those who have your best interests at heart are the best advisors. For the same thing, you should reach out to reputable franchises like IIFL in order to stay bullish on your future by becoming an RIA (Registered Investment Advisor).

Frequently Asked Questions​

Ans: The Securities and Exchange Board of India regulates an RIA (Registered Investment Advisor) under the SEBI (Investment Advisers) Regulations 2013. Under the regulation, every entity is required to obtain a certificate of registration from SEBI or any other licensed institution unless an exemption specifically applies.

Ans: Under how to become an independent advisor, an individual must have a net worth of Rs 5 lakh to be eligible for applying for an RIA (Registered Investment Advisor) certificate.

Ans: The  application is filed with the Head Office or the concerned Regional Office of SEBI. The addresses can be found at www.sebi.gov.in and also on http://www.sebi.gov.in/sebiweb/stpages/contact_us.jsp.

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