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Need comprehensive advice on financial planning? Go with an RIA

Those who only need to invest in MFs may use the services of a distributor

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The Securities and Exchange Board of India (Investment Advisers) (Amendment) Regulations, 2020, will come into force from October 1. These regulations have clearly demarcated the activities that registered investment advisors (RIAs) and mutual fund distributors (MFDs) can undertake. Investors need to think hard about the services they need before deciding which of the two entities to engage with.

What will change?

The regulator has asked for client-level segregation. If you avail of advisory services from an RIA, then you cannot avail of distribution services from the same entity or from his family member. On the other hand, distributors cannot advise you on your financial goals. They can only sell MF schemes.

Existing clients need not sell or switch their existing investments to comply with these regulations. But for future needs, they will have to use separate entities for advice and distribution.

Whom should you go with?

Whether you go with an RIA or MFD should depend on the services you need. “If an investor wants comprehensive financial planning, including risk profiling and regular portfolio monitoring, then an RIA is the best option. But if you are looking only to invest in MFs, you may approach an MFD,” says Pankaj Mathpal, founder and chief executive officer (CEO), Optima Money Managers.

Adds Vishal Dhawan, founder and CEO, PlanAhead Wealth Advisors: “Those looking for goal-based planning or advice on multiple products should go to an RIA.”

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First Published: Fri, October 23 2020. 19:09 IST