It?s been about two months since market regulator Sebi announced its intention to set up a self-regulatory organisation (SRO) for wealth managers. While the industry is still waiting the new set of guidelines, proposals such as better relationship management norms, mandatory advisory fees and client education programmes top the wish list of wealth managers.
?We expect clear-cut guidelines on client relationship management,? said Rupesh Nagda, head (investment and products), Alchemy Capital Management. He added an advisory fee ought to be made mandatory to ensure relationship managers (RMs) aligned their interest with that of their clients.
Manish Boricha, vice-president, business head (PMS and HNI), Sharekhan backs Nagda?s views, ?This business is primarily driven by relationships; so there needs to be greater transparency in reporting to the clients.? One of the ways to achieve this, according to Boricha, is ensuring that the RMs and agents are well-qualified to sell the product.
At present, selling mutual funds and insurance requires distributors and RMs to give Association of Mutual Funds in India (Amfi) and Insurance Regulatory and Development Authority (Irda) examinations. Some wealth managers now advocate a common exam for wealth management on the lines of, say, a certified financial planner (CFP) that will help RMs to better understand the clients? asset allocation requirements.
Others, though, are wary of additional certifications. ?It could be costly to get the RMs certified. Instead of something like a CFP, National Institute of Securities Markets (NISM) could work on a simpler certification that covers wealth advisory, asset classes and product selection modules,? said Nagda.
According to Boricha, it?s the clients, rather than the RMs or the distributors, that need to be educated. ?How many clients understand derivatives or complex structured products and the risks involved? The SRO must provide guidelines to educate clients.?
Some feel that India should follow countries like Singapore which makes a distinction between qualified and non-qualified investors.
?The kind of checks and balances that apply for investors with a corpus under $1 million (R4.5 crore) should not apply for those high net worth individuals with either significant investment experience or some sort of professional expertise,? said Satya Narayan Bansal, CEO, Barclays Wealth.
According to Vishal Kapoor, general manager (wealth management), Standard Chartered India, the SRO has to work on ?prescribing a process required to execute a particular regulation to ensure consistency for all stakeholders involved?.
Wealth management is an investment advisory discipline that includes financial planning, investment portfolio management and a number of aggregated financial services. The industry has come into the regulatory glare after a spate of scams came to light recently.