Dhruv Mehta, Chairman FIFA
I think the RIA regulations are perhaps a little too early for our country, given the nascent stage at which capital market products have penetrated so far into the average Indian household. I also believe they are unfair, since the regulations allow large distribution houses to run separate departments for advice and distribution, but compel an individual intermediary to choose between being an advisor or a distributor. I don't see the RIA model being enforced as the only intermediation model at least in the next 3 years. That said, if I were to take a longer term view of 5-10 years, I would say that RIA is the way SEBI wants intermediation to go.
Neeraj Choksi, Jt MD, NJ India Invest
One thing that is clear from SEBI's actions is that it is very focused on investor protection and will take actions that it believes are in the best long term interests of the investor. SEBI is unlikely to take actions that it believes will be detrimental to the interests of investors. This is the basic principle we must keep in mind when engaging with the regulator on any aspects relating to intermediation business models and what is the right model for our country. Whatever is the model that we as an industry believe is right for the Indian investor, it is upon us to showcase to the regulator why it is in the best interests of the investor. In terms of how I see regulatory thinking on advice vs distribution, I agree with Dhruv - I don't see RIA being enforced as the only model at least in the next 3-5 years, but longer term, I see regulatory thinking preferring RIA as the intermediation model.
Nitin Rao, HDFC Private Banking
We have already implemented the SIDD model and have created a separate RIA division within the Bank. We have met with SEBI, understood what they expect, and have implemented the model accordingly. In our interactions with SEBI, we found them fully up to speed with our service propositions and fairly clear about how they see the SIDD model operating within a structure like ours. Splitting advice and distribution has meant that the role of the RM has diminished to an extent, as the RM is no longer able to offer advice. Advice comes from a central RIA unit. We have also had to take a back seat on some of the third party products like AIFs and have stopped actively distributing them. Our aim is that as regulations evolve, we will engage with the regulator, understand what they expect, and ensure that we remain in compliance at all times.
Karan Bhagat, IIFL Wealth Management
We are actively evaluating the SIDD model under the RIA regulations. My own sense is that the tipping point that may push distributors to take up the RIA licence is really the growth of direct plans. In equity funds, direct plans are already at north of 10%. When you see that number go up to say 20%, it will become too large to simply ignore. You will then have to think of the RIA model, help clients transact in direct plans and seek an advisory fee which will be a portion of the difference between where direct and regular plans are priced. Of course, data feeds will need to be made available for RIAs to operate this model in a viable manner.
Lovaii Navlakhi, International Money Matters
I think the debate on when SEBI will push us towards RIA got settled a couple of years ago, with the introduction of RIA regulations, and if any of us had a doubt, that doubt was removed with the FAQs that were published in Feb 2015. To my mind, any multi-product distribution firm has to seek RIA registration. Most distribution firms are involved in multiple products - mutual funds, insurance, bonds etc - since all of them have a place in client portfolios. If you haven't yet registered with SEBI, I don't think you are on the right side of regulations, as they stand today.
Jignesh Desai, Jt MD, NJ India Invest
Nobody frankly knows whether SEBI will at some point enforce RIA as the only intermediation model, and if they do, when are they likely to do this. The only thing we can do is to ensure that we are future ready, whichever way the regulations evolve. There are only two things I believe we should focus on: (1) Be completely client-centric. As long as your clients need you, you will remain in business, and you will find workable solutions as and when regulations keep evolving, and (2) Think seriously about platforms. Either join a platform, or if some IFAs get together, create your own platform. I strongly believe wrap platforms are going to become increasingly relevant - whether it is for compliance related issues or pricing flexibility or client-centric practice management support - platforms will enable IFAs to respond effectively to regulatory change.
Brijesh Dalmia, Dalmia Advisory
I believe it is too soon for a fee-only model to be implemented in our country. I believe the trail commission model works very well, and should be persisted with. A fee only model is not practical in large parts of the country, and can do more damage than good, at least in the near term. At the same time, I do see why the regulator prefers a fee only model over a commission based revenue model for intermediaries. I agree with what Jigneshbhai says - what we need to do as IFAs is to ensure that we are extremely client centric. Client centricity is at the core of the entire regulatory debate on fee-only vs commission based revenue models. Our response therefore should be to address the core issue - which is to be client centric - and leave it to the regulator to regulate as they deem fit. I don't think we should worry too much about trail commission structures going away anytime soon. But if you were to take a 10 year view, I agree with the assessment that fee-only models may become the way we need to go.
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