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(Thread) A self-employed professional in the financial services industry has broadly three areas to deal with:
1. Regulators/Compliance (SEBI, MCA, RBI, GST, IT..)
2. Investors (Behavioural Counselling..)
3. Investing/Research (Equities/Mutual Fund..)
1/n
1. Regulators/Compliance (SEBI, MCA, RBI, GST, IT..)
2. Investors (Behavioural Counselling..)
3. Investing/Research (Equities/Mutual Fund..)
1/n
While real value addition is 3rd, followed by 2nd, unfortunately, a significant time & mind share goes in dealing with 1st.
You may have all the passion for the financial markets and relevant experience & academic degrees to back it up, but is that enough to be successful in your
You may have all the passion for the financial markets and relevant experience & academic degrees to back it up, but is that enough to be successful in your
entrepreneurial journey? Turns out the domain knowledge comes a lot later in the pecking order of the skills required to be on your own.
While large institutions have consultants/lawyers, the individuals are left wondering if they are on the right side of compliance (often grey)
While large institutions have consultants/lawyers, the individuals are left wondering if they are on the right side of compliance (often grey)
which takes a huge mind share/peace.
The frequent and ad hoc changes with short notice periods (less than a week), retrospective implementation, multiple overlapping regulations & lack of clarity in actual regulations vs the intent, unfortunately, might soon end up killing
The frequent and ad hoc changes with short notice periods (less than a week), retrospective implementation, multiple overlapping regulations & lack of clarity in actual regulations vs the intent, unfortunately, might soon end up killing
the nascent & tiny category of fee-only advisors & analysts.
From 1st Oct 2020, the individual advisors/analysts with more than 150 clients can’t accept any new clients, until they form a corporate body (along with a new PAN, TAN, GST…), provide funding of Rs 50 lacs,
From 1st Oct 2020, the individual advisors/analysts with more than 150 clients can’t accept any new clients, until they form a corporate body (along with a new PAN, TAN, GST…), provide funding of Rs 50 lacs,
apply again to SEBI at a registration fee of Rs 5.5 lacs & get approval, which can all take anywhere b/w 6-12 months.
Not only can they not onboard new clients, but they (along with non-individual IAs) will also be spending most of the next 6 months complying with new regulations
Not only can they not onboard new clients, but they (along with non-individual IAs) will also be spending most of the next 6 months complying with new regulations
which apply ‘retrospectively' - like entering into physical contracts with all existing clients, segregating advisory and distribution, ensuring fee caps are not breached etc. Earlier, the payment gateways were banned all of a sudden, and now significant restrictions are put on
advance fees which make the model unviable for the vast majority of advisors/analysts. It is not just the financial barrier but also the operational burden which makes compliance very difficult and in some cases, it is not even practical - for instance, an advisor is now supposed
to record each & every telephonic conversation with each of its clients & store the records for the next FIVE years.
Even for PMS, the net worth requirement has been increased to Rs 5 Cr from 2, while that’s tiny for most incumbents, it has actually increased the financial entry
Even for PMS, the net worth requirement has been increased to Rs 5 Cr from 2, while that’s tiny for most incumbents, it has actually increased the financial entry
barriers to young talent.
Meanwhile, the Mutual Fund Distributors have been asked to change their name or get registered as IA:
Meanwhile, the Mutual Fund Distributors have been asked to change their name or get registered as IA:
Apparently, the intent behind all these regulations is to protect Investor Interest, but all this is happening at a time when we are in midst of the biggest pandemic ever, and experiencing significant volatility in the markets.
Then shouldn’t all attention of advisors/analysts be solely on the client portfolios and hand-holding their investors? But would there be any time left with individuals after the struggle to meet these stringent and time-bound conditions?
The unfortunate reality is that amidst all this, the scamming hubs like Indore would continue their malpractices through multiple corporate entities and multiple licenses backed by an army of lawyers to deal with regulators.
It’s just the honest individual advisor/analyst who will be managing this entire transition over the next six months and added compliance burden all by himself/herself. Many who recently started practice would simply give up helplessly.
While for Indore guys, the worst case would involve them paying a couple of crores in penalties from 10s of crores they might have earned by selling F&O tips, and eventually, they might even come back in another avatar to continue mis-selling.
You may read more here: 'Killing the Small Advisor' by @Prashanth_Krish https://www.portfolioyoga.com/wp/killing-the-small-advisor/ (End)
