Your Mutual Fund Advisor cannot be an Advisor without RIA!!
Most mutual fund investors route their investments through a person whose visiting card would describe him (or her) as a mutual fund advisor, investment advisor, investment consultant, wealth manager, among others. However, this is going to change in the next three years – your advisor would either become a registered investment advisor (RIA) or a mutual fund distributor. And the new designation would have a big impact on your dealings with your advisor.
Sebi has submitted a consultation paper on amendments to the SEBI (Investment Advisers) Regulations, 2013. The market regulator has invited opinion from public on an amendment in regulations which will make it mandatory for the agents to either register themselves as an advisor or a distributor.
Why is it a big deal?
Well, at the moment you go to a person who advises you about what schemes to buy, help you to fill up the required forms and complete the formalities, and take care of submitting it to the mutual fund office, monitor your investment, … Simply put, the person takes care of your entire investment. That too, free. (Don’t worry, he gets commissions from the fund house)
If Sebi goes ahead with its new norms, this will stop immediately. Your advisor has to decide whether he wants to continue as mutual fund advisor or a distributor. He can’t be both at the same time. If he continues as a distributor, he will get commission from the fund houses. If he chooses to stay as an advisor, he will have to charge you a fee for his service.
Distributor won’t speak
If you see people sitting with their mouth taped, you know your advisor has decided to become a distributor, jokes a wealth manager. The point is: the distributor cannot offer any advice. They can simply hand you out forms, help you to fill it, submit the form, etc.
“According to the recent consultation paper submitted by Sebi, distributors won’t be allowed to recommend schemes in a category to align with the goals. They can only explain the features of the product and help with the execution part,” says Amit Trivedi, Financial Trainer, Karmayog Knowledge Academy. “Your mutual fund agent will not be allowed to answer questions like, which scheme should you buy, etc,” adds Trivedi.
So, if your advisor has decided to become a distributor, you may have to look for an advisor to help with your investments.