The number of SEBI registered investment advisors in the country may increase. Currently, the number of SEBI registered investment advisors in India is around 900. This is very less considering the population of the country.
SEBI may give some relaxation in the conditions set for the registration of investment advisors. The market regulator presented a consultation paper on this on August 6. Earlier, SEBI had formed a committee in this regard. After considering the recommendations of the committee for several months, the market regulator has now decided to change the rules for registration of investment advisors.
Difficulty is arising due to this proposal of SEBI
But, the matter is getting stuck due to SEBI’s proposal. In this proposal, investment advisors will not be allowed to give advice about those services and products which do not come under SEBI or any other financial regulator. SEBI’s consultation paper states that there will be a separate entity for such products or services apart from a separate brand. SEBI ‘s concern is that it will not be able to resolve complaints related to those products or services which do not come under its purview.
This proposal of SEBI has brought loss instead of benefit
This proposal of SEBI can harm the investors instead of benefiting them. This can be understood with the help of an example. Suppose an investor named Abhishek seeks advice from registered investment advisors about physical gold bars. He has inherited these gold bars from his father. He wants to use them for his son’s marriage which is at least 10 years away. Investment advisors can advise him to sell this gold and invest in sovereign gold bonds.
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Investors seek advice on a range of assets
This way his investment will remain in the same asset class (gold). Along with this, he will also get interest on gold and exemption from capital gains. He finds this advice good. He wants to know where he can sell this gold. The investment advisor advises him and he sells the gold and invests the money in SGB. Another investor is Manish, who has two houses and a consultancy company. He wants to sell some stake in his company, which can give him a good amount. He wants to sell one of his houses to buy a bigger house.
Tax savings are made with the advice of investment advisors
The investment advisor tells Manish which deal he should do first. First he is advised to sell the house. He can use this money and capital gains to buy another house. This will give him exemption from paying tax under section 54 and section 56 of the Income Tax Act. In this way he avoids paying tax on capital gains.
SEBI should put investors’ interest first
The above example shows how comprehensive financial planning should include advice on everything from tax planning, estate planning to investments like gold. For financial planning to be successful, an investor needs a variety of advice. The above example also makes it clear that investors need advice beyond the limits of regulators. All regulators should put investors’ needs first.
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