In a world of complex financial instruments, volatile markets and innumerable options of investment, navigating the investment landscape can prove to be quite a challenging task and this is particularly true for the average investor. This is precisely where the SEBI Registered Investment Advisor comes into the picture.
The Securities and Exchange Board of India (SEBI) shoulders the responsibility of governing the financial markets. Strict guidelines have been implemented to ensure that the investors receive financial advice that is unbiased, ethical as well as professional.
Why is it necessary to work with a SEBI Registered Investment Advisor?
Let us explore why it is important for anybody to seek the assistance of a Registered Investment Advisor particularly when it is about growing and protecting his or her wealth.
Who is a registered advisor?
A SEBI Registered Investment Advisor could be a financial professional or a firm that is authorised as well as regulated by SEBI to offer investment advice and such professionals follow a fee-only model and do not earn any kind of commissions.
The strict guidelines that the Registered Investment Advisor follows
The advisors are required to follow strict guidelines and that includes the following:
- They are required to maintain transparent fee structures. When you work with the registered advisor, it is ensured that you pay only for the advisory service and this process helps to build trust among the investors.
- The Registered Investment Advisor needs to disclose potential conflicts of interest. The Investment Advisors Regulations was introduced in 2013 by SEBI to ensure that the financial advisors adhere to ethical standards and also meet certain standards. This ensures that investors are protected from any kind of financial advice that is misleading and also conflicts of interest. It is mandatory for an advisor to be registered with SEBI before providing any kind of financial or investment advice.
- The registered advisor is required to offer investment or financial advice that is in the best interest of the investor. The advisor needs to provide unbiased financial recommendations.
The benefits of working with an advisor registered with SEBI
Working with a SEBI Registered Investment Advisor implies that you are receiving financial advice from a professional who is under the strict scrutiny of a regulatory body. This ensures strict compliance with legal obligations as well as ethical standards.
SEBI monitors the very conduct of the registered advisors. In case of any kind of complaints, they are thoroughly examined as well as investigated and in any kind of potential issues, disciplinary action is taken. It definitely means peace of mind for the investor as it is known all along the way that there is somebody who is there to ensure that the advisor is acting in a fair and transparent manner.
One of the key regulations that is enforced by SEBI revolves around the fact that the SEBI Registered Investment Advisor cannot earn commissions but can only charge a fee for the services that are being offered.
This kind of enforcement ensures that the bias which is often associated with commission-based models is removed. Thus the scenario where advisors are seen to recommend the financial products that help them earn higher commissions instead of those which actually would have benefited the investors, does not arise.
The registered advisors are always bound to act in the best interest of the investors, that is, they provide fiduciary investment advice.
The current scenario
There has been a rapid growth in the number of digital transactions as well as the online investment platforms. With such a growth there has been a marked increase in the number of financial fraudulent activities and that indeed is a cause of concern.
There are many entities and individuals who are not registered and pretend to be investment advisors. Such unregistered individuals promise high returns and persuade the investors to make inappropriate investment decisions. This has often led to substantial financial losses. This makes it even more important to work with SEBI Registered Investment Advisor as it is ensured that the advisor is legally bound to provide the financial advice that best suits the needs of the investor.
The additional advantage
In case of a situation where the investor is not satisfied with the services offered by the Registered Investment Advisor, then the investor always has the option to seek assistance from SEBI. The investor can obtain such protection and support only when he or she works with a SEBI registered advisor.
Assisting with comprehensive financial planning
SEBI registered advisors provide assistance associated with comprehensive financial planning and this includes retirement planning, insurance planning, developing investment strategies that are goal-based and the list goes on.
Such financial advice by the registered advisors is based on an in-depth understanding of the risk profile of the investor, the time horizon, the financial goals and also the financial situation. The focus is always on reaping the maximum benefits for the investor.
Some reasons why you should avoid taking assistance from unregistered advisors
There are several reasons as to why you should avoid taking financial assistance from unregistered advisors. Some of them are listed below:
- They often provide recommendations that are biased for earning commissions
- They often lack the required expertise and the experience
- Poor risk assessment may often lead to inappropriate investments and losses
Final Note
The financial future depends to a large extent on the kind of investment advice that is received. Therefore, it becomes important to always get associated with a SEBI registered advisor who operates under strict regulations and provides financial advice that is transparent and also unbiased.