Nearly five months after Sebi brought in Investment Advisers guidelines, just a handful of entities have come forward to register.
Just seven independent advisers and four corporates ? IFMR Investment Adviser Services, Sensage Financial Services, Valuefy Solutions and ICICI Securities ? have registered as investment advisers. The regulations were notified in January and became effective on April 21. As per these regulations, those registering themselves as advisers can charge a fee to clients, but are disallowed from taking any commissions from manufacturers for selling their mutual fund products.
?How many distributors want to become investment advisors will be a direct function of the customer demand for such fee-based services,? said Dhruv Mehta, chairman, FIFA, a body of independent financial advisors. ?Customers are still reluctant to pay separate fees for advisory services; they would rather pay one cheque to their distributor and get the work done. This mindset will require some time to change.?
An important reason independent financial advisers (IFAs) may be reluctant to register themselves is the added cost of doing business once they become investment advisers. The guidelines mandate risk profiling of clients, maintainance of records and redressal of client grievances, which could add to the costs.
Experts believe that the big distributors will eventually create two separate divisions to sell MF products ? one for execution-based transactions and the other for advisory. ?Large distributors, including banks, are in the process of developing their internal structures to set up their investment advisory divisions,? said Surajit Misra, executive VP & head, mutual funds, Bajaj Capital. ?This process could take some time.? As per Sebi?s Investment Advisers regulations, banks, NBFCs and corporates providing distribution or execution services to their clients shall keep their investment advisory services segregated from such activities.