The Future Of Fiduciary Advice In India – Building Trust And Not Just Rules

By Vivek Rege

In an age where time and trust are scarce, fiduciary advisors play a timeless role. The Securities and Exchange Board of India – registered investment advisor (Sebi RIA) framework exists to reclaim both by freeing investors from the time-drain of misinformation, while simultaneously reinstating trust through conflict-free and evidence-based advice.

The Sebi (Investment Advisers) Regulations, 2013, is now in its 13th year of implementation, having undergone two major policy interventions — first in its 8th year (2020), and again in its 12th year (2024). Each amendment cycle has reflected Sebi’s evolving effort to balance investor protection, market integrity, and professional viability.

The latest policy intervention was a masterstroke for ease of doing business, which aims to correct the supply side constraints while demand remains intact and increasing for fiduciary advice, as India moves towards the path of ‘Viksit Bharat 2047’.

Recent Changes Effected

Notable changes include relaxation of qualification and experience criteria, thus expanding the feeder pool of potential advisors instead of mandatory post-graduation or long experience, but qualifying a tough NISM XA & XB exams. It’s a well-established fact that postgraduate degree or long experience alone do not create an ability to advice and charge a fee; postgraduate degree or long experience can signal competence, but clients don’t pay for degrees, they pay for trust and relevance, and therefore, a tougher qualifying exam for the first entrant became the entry level criteria. It can help attract younger, tech-driven professionals and career-switchers into advisory practice.

Even globally, regulators like the US Securities and Exchange Commission (SEC), UK Financial Conduct Authority (FCA), and the Australian Securities and Investments Commission (ASIC) require competency plus continuing education, not rigid academic degrees. In the recent Sebi board meeting, there was further relaxation allowing graduates from any discipline to be eligible to be an investment advisor (IA).

The ‘Deposit Requirement Replaces Net Worth’ norm has removed the high capital requirement, since this role requires knowledge capital and this was well recognised by Sebi since its first introduction.

The ‘Scope Clarification & Disclosure for Non-Sebi regulated Products and Services’ was another major relief provided by Sebi to allow non-Sebi products and services with scope clarification and required disclosure to the client as such advice falls outside Sebi’s regulatory purview, and there is no recourse available under Sebi for those parts and without creating a separate entity. Had this been restricted or even a separate entity was mandated, it could have increased the cost of business multi-fold, thereby adding complexity. In turn, the end investors who avail of these products and services would have been affected due to these restrictions.

Recently Proposed In Sebi Board Meeting (Awaiting Circular)

Sebi’s move to permit verified past-performance display by Sebi RIAs signals a shift from opacity to accountability. It recognises that fiduciary trust grows not from silence, but from evidence — disclosed responsibly. These are subject to conditions of one to one sharing of performance and cannot be advertised till the time ‘Past Risk and Return Verification Agency’ (PaRRVA) is operationalised. However, this is a welcome step for those IAs who wish to display performance to the client who seeks such information.

Permitting IAs to provide second opinion to clients on pre-distributed assets by non-group entities is another welcome step that allows for reviewing the client’s existing portfolio, which may have been constructed by another distributor, or the client themselves, and provides an independent fiduciary assessment. There are often requests from investors who have portfolios under distribution that they need an independent fiduciary to review the portfolio. This was earlier not allowed. However, the regulator understood the need to empower the investor to seek advice from a registered and regulated entity licensed by Sebi, which paved the way for this change.

The ease of transition from individual IA to corporate IA, where timelines have been extended to accommodate transition of entities, who are or have reached the threshold limit is another welcome step. Earlier, this was restricted; but now the IA can add new clients without any restriction during the transition period. This has removed the anxiety around transition and has practically given a green signal to the IA who has started the conversion process from individual to corporate.

Other changes involve reducing paperwork for applying for a license, and the moved to declaration-based approach for ease of doing business.

What Should Remain Intact And Uncompromised

Financial planning is inseparable from fiduciary investment advice. The Sebi (Investment Adviser) Regulations, 2013 were designed precisely to ensure that investment advice is given in a fiduciary and holistic manner, not as a product-selling advice. Financial planning, i.e., assessing goals, risk, cash flow, and suitability is the foundation of any fiduciary investment advice.

It is for this very reason that IA regulations define suitability whereas mutual fund distribution (MFD) regulations define appropriateness, since under appropriateness, incidental advice is provided and not the advice itself, because when a product is distributed, it may by its very act satisfy a need or goal of an investor and therefore be incidental in nature. On the other hand, an IA is provided much greater responsibility under the regulations to satisfy suitability to an investor, which is much broader and a main ingredient in delivering fiduciary advice.

Therefore, financial planning is an integral process in investment advisory, and not a parallel profession. Separation will not simplify the regulations; on the other hand, it will disturb the well settled principle and dilute investor protection, leaving consumers vulnerable to unregulated planners offering product-linked advice. That will be precisely the scenario the Sebi (Investment Adviser) Regulations, 2013 sought to prevent, since no other regulator, such as the Insurance Regulatory and Development Authority of India (Irdai), the Pension Fund Regulatory and Development Authority (PFRDA), and the Reserve Bank of India (RBI) currently covers comprehensive financial planning and Professional bodies. The Financial Planning Standards Board (FPSB India) certifies competence, but cannot enforce conduct or redress grievances.

Once completed, the financial planning process culminates into investment or securities as one of the main parts of wealth, which is majorly dealt by Sebi in India. Other parts like risk, tax, estate are ancillary in nature and hence these are now separated with the recent regulatory changes subject to disclosure.

Separating financial planning may invite regulatory arbitrage with advisors labelling themselves as “planners” to escape fiduciary obligations or compliance, but it may kead to stricter regulations in the future.

What Should Change

Often slower growth in IA is equated with compliance. However, blaming the regulation rather than regulatory design in turn is taking a myopic view about the regulations and its importance in developing trust. If distinction is made between strategic compliance vs operational compliance, then the problem can be well tackled in a systematic manner without burdening the entities who operate and have chosen to take license and practice as an IA. At times, things are difficult operationally, but in-principle, they are correct. This requires more dialogue and a task force to iron out the operational compliance burden to ease. The Association of Registered Investment Advisers (ARIA) has been doing tremendous work in this space along with Sebi to improve the regulatory landscape.

Graded compliance is the need of the hour, as the size of entities vary significantly with statistically smaller entities making up for most of the license holders. These individuals are also growing, and once they cross the new threshold limits, they can apply and transition to corporate, and then, as they scale up further, a few of them would create institutions.

Risks attached to each size are different and a graded approach would pave the way for ease of doing business in its true spirit. For instance, as an individual, the principal officer is the compliance officer. However, as a corporate, a compliance officer has to be appointed who is distinct from the principal officer. This may be correct in principle; however, the scale does not change immediately for most, but the cost increases. These can be further graded where it is mandatory to have one appointed. In all cases, finally the principal officer stands responsible. These frictions can be identified and eliminated whereby it will change the way the regulations are perceived to be investor and entity friendly if done in the right spirit. Else, the regulators have the powers to ensure investor protection and market conduct is not compromised.

Introduction of regtech is very important from a standpoint of ease of reporting and compliance with accuracy. This can be one game changer in times to come with the advent of technology, where compliance becomes just another activity which can be efficiently done through usage of regtech.

On the lines of ‘Mutual fund Sahi Hai’, it’s important to emphasise ‘Advisor Zaroori Hai’, as mere buying of products solves one issue. But as India moves towards a ‘Viksit Bharat 2047’, more investors will need an advisor who is paid by the investor only and no one else. One also needs more investor awareness about RIA.

We cannot solve the problem of willingness to pay for those who have capacity to pay. But those who want to pay and understand the importance of an independent advisory even if they don't understand the meaning of fiduciary, it requires awareness that an RIA is the one whom they are seeking. This will fuel supply in the cities and towns; it is a chicken and egg situation, which needs to be solved for.

In fixing regulation, don’t discard the fiduciary principle with the paperwork. While draining the excess of process, retain the essence of purpose. Ease the rules, not the responsibility.’

India doesn’t need more regulation; it needs better architecture. A structure where trust scales with technology, and quality grows with access. Step-by-step, and not by shortcuts, we can make fiduciary advice a household norm, and the good news is that steps are being taken in the right direction thoughtfully and carefully and not in a haste by Sebi to prove a point of numbers and compare it with non-comparables. That’s because RIA should be kept different for the interest of the investor.

The author is a Sebi RIA and principal officer, V R Wealth Advisors

(Disclaimer: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.)