Is it compulsory to become RIA (Registered Investment Advisor)?
No. As of now it is not compulsory. (14th Apr’2018)
If I work with national distributors as a sub broker, am I covered under RIA regulations?
Yes. Whether you work direct or as a sub broker, the rules are same.
If I am a Registered Investment Advisor (RIA) and charge a fee, can I receive commission from AMCs on my future business?
As per current laws (31st July’2019), if you are registered as RIA in individual capacity, you won’t get comission on future business. However, if you are registered as a company and you can differentiate between who will advise and who will execute (separate divisions), you might continue to receive commissions from AMCs for future business.
Is trial going to be banned? If yes, what is the future of mutual fund distribution business?
There is no such news as of now. Infact, the recent changes made by regulator on the TER structure (which came in effect from 1st April’2019) in itself might be an indication that trail comission is going to stay in the foreseeable future. This is because trail is down by almost 25-30% for most distributors. Low comissions reduces conflict of interest which SEBI wants. Also, the fee model hasn’t really taken off in India and regulator is aware of that. There are no guarantees but I think trail is here to stay for some time.
Let’s say, trail is further reduced and total yield on AUM drops to 0.50% per year. I think this is still sustainable. Build your business model where trail is 0.50%. The silver lining is that – the difference between direct and regular will reduce which will help in retaining clients who earlier wanted to move to direct.
Even if I take a scenario where trail is stopped, it is not the end of the road. You can become a Registered Investment Advisor (RIAs) and charge a fee. Today, you may think charging a fee is difficult but when commissions are banned, clients will be prepared to pay a fee. Yes, it may be difficult in the beginning and income will drop for a few years and many distributors will .
Every business is dynamic. Nothing is guaranteed anywhere. You will have to change yourself. I believe, if you have AUM of clients with you, you will find a way to earn. As far as clients believe in your advice, you will be remunerated. You should also do your own financial planning before such thing happen. Save money. You will be able to face it better. (31st July’2019)