The Importance of SEBI Registered Investment Advisor

The world of finance and also investments is quite intricate and when it comes to making informed financial decisions then it becomes crucial to choose the right professional who would actually act as the perfect guide. There are individuals who consider seeking advice associated with investment from various sources. But it so happens that not all financial advisors have the appropriate qualifications for the purpose of offering recommendations or suggestions about the investments.

Seeking the expert financial advice

Having said that, it becomes clear as to why the services offered by SEBI Registered Investment Advisor are so important. The Securities and Exchange Board of India or SEBI is the regulatory body that is associated with the governing of financial markets in India. Strict guidelines have been implemented by this governing body and it has been ensured in the process that investors receive investment advice that is professional, unbiased and also ethical. However, an obvious question that may arise revolves around the fact as to why should investors only seek the advice from SEBI registered advisors. Well the answer is covered in the sections that follow.

Transparency ensured

A SEBI Registered Investment Advisor could be an individual or a firm that has obtained a license from SEBI or Securities and Exchange Board of India for the purpose of providing advice associated with investment, financial planning and portfolio management services. Such an advisor works on a model wherein no commissions are earned from suggesting financial solutions and this procedure is much unlike the way in which the mutual fund distributors or the insurance agents work.

Some of the many responsibilities

Some of the most important responsibilities that are shouldered by the Registered Investment Advisor include the following:

• The advisor is associated with providing investment advice that is unbiased and can be trusted.
• Risk profiling is carried out in a detailed manner before any kind of recommendations or suggestions about investment are given.
• Care is taken to ensure that the advice associated with the investment aligns in a perfect manner with the various financial goals as well as risk tolerance of the investor.
• Strict SEBI regulations and also compliance requirements are adhered to.

Working with a registered advisor

That was something about the responsibilities of the advisor. However it is important to understand what makes it so important to work only with a SEBI Registered Investment Advisor.

As per the regulations, only the registered advisors can provide investment advice in India. Further, if the firm or the individual offers financial advice in the absence of SEBI registration then it is considered to be an illegal operation.

Strict regulation and monitoring

A Registered Investment Advisor is monitored as well as regulated and in the process compliance is ensured along with ethical as well as professional standards.

The risks associated with mismanagement and even fraudulent practices is more in the case of a financial advisor who is not registered with SEBI.

When an investor works with an unregistered financial advisor, then hardly any legal protection is provided in the case of financial loss or misleading financial advice.

Thus it becomes extremely important to ensure that the financial advisor is a SEBI registered advisor.

Trusted services offered

One of the most important reasons as to why one should always seek financial advice from a SEBI Registered Investment Advisor revolves around the fact that they have a fiduciary responsibility. This implies that such advisors have a legal obligation and they work in the best interest of the investor and cannot just sell the different financial products for their own personal gain.

A registered advisor is one who earns only from the fees provided by the clients and in the process it is ensured that the financial advice that is offered is absolutely genuine and also unbiased.

The investor knows exactly for what kind of financial advice the payment is being made and the entire process is transparent and the problem of worrying about the hidden costs or charges is not there absolutely.

Paving the way for goal-oriented planning

A financial planning that is goal oriented is something that the Registered Investment Advisor focuses on. In this context, it should be mentioned here that mutual fund distributors or the insurance agents actually have only those financial products in their priority list that provide them with the highest commissions and they even sell only those products.

Efficient risk management

Investment advice is not associated with just picking the best mutual funds, instead the whole process should consider matching the risk tolerance of the investor, also it should align with the financial goals and take into account the investment horizon. The SEBI registered advisor conducts a comprehensive risk profiling of the investor before making any kind of financial suggestions or recommendations to the investor.

Personalised recommendations

The advisors provide suggestions that help the investor to receive investment strategies that are personalised ones and not just generic recommendations about the financial products. The investor also gets the opportunity to build a portfolio that is based on his or her financial requirements and not just on the market hype. The financial risks can be avoided that never align with the financial capacity of the investor.

In the absence of appropriate risk management, it could be that the investor could end up making financial decisions that do not match with the long-term financial goals.

Final Note

It was seen how important the role of SEBI investment advisor is and why an investor should always work with such an advisor. The financial future of the investor is dependent on the kind of investment advice he or she receives and by working with a SEBI registered advisor it is ensured that the investments are aligned with the financial goals as well as the risk appetite.