It takes 17 years to pass class 12th in India. Then you can become a financial adviser. For a doctor who is in the top 500 in the Board Exam, if he/she gets through another grueling exam, he can qualify to join a medical college.

Then he passes his MBBS in 4 years and does one year Intern. Then he does a 3 year post graduation. Then he does a one year intern. Then he does DM (doctorate in medicine). Then at a ripe old age of 30 he sets up practice. He then must intern with a senior doctor (or a government hospital) and then start earning. At the age of say 35.

By that time the “adviser” or “distributor” has accumulated Rs. 100 crores of assets and is earning about Rs. 1 crore in terms of fees, trail, etc.

The doctor does not reach the figure of Rs. 1 crore till he reaches the age of 50 (as an employee)..

so I guess comparing a RIA and /or an IFA to a doctor seems to be a little difficult.

Similarly it takes about 4 years to become a CA – and in the process has 3 exams. Of these 2 at least are grueling (stupid American spelling)..

I do think RIA should not compare these professions…the entry, the staying in the profession (ethics, morals, disciplinary action) is far more difficult  – for a CA or a doc than for a professional mutual fund adviser / distributor.

Entry into the RIA field is not a minefield for sure. Nobody (almost nobody perhaps) fails this exam. It is more like a forest – there are no signalling systems, traffic police…etc. Literally anybody can become an adviser. The current mechanism of multiple compensation to different members of the family, lack of enforceable code of conduct, lack of a regulated membership body, – it is still a cowboy range out there.

Go and see the history of the advisory growth in the USA. Stories of cheating, court cases, suits, court pronouncements – all these are a big and important part of growing up. Sure one day our Advisory “business” or “profession” will reach there. We are not there yet. Surely not as of now.

Should there be a ceiling on the fees? I hate it when a baboo(n) who gets an indexed pension decides how much others should earn. What I earn from a client is a matter of discussion and agreement between me and my friend (client). It does not matter what a regulator thinks. No profession can have a fee cap (or bottom) and hope it works. The CA institute tried some such caps and collars – and then gave it up. Fees can just be a suggestion, not an absolute amount. The regulator has no business in doing so much of micro management. I am sure they have a lot of things to do than micro manage. I also do not know how the regulator can manage the compensation that the mutual fund industry will give to the RIA – I can assure you it can take many forms. In the US it is called soft dollar commissions, and it is at least talked about. Here it is just assumed to be nil. That’s amusing.

Making a distinction between distribution and advice is fine, but what happens if a husband an RIA marries a distributor? will the regulator ask one of them to give up the profession? what if a father is a distributor and daughter qualifies as an RIA? what if the daughter gets married in 2 years? does the father suspend his ARN during the marriage time? sounds odd does it not?

We have another big problem. What about regulating the people selling an absolutely similar product – the ULIP. I do not think the Insurance regulator is seized of the compensation of the agent. Sure there are some caps, but nobody in that industry is even talking about it. From next month it is compulsory to do a proper need analysis before a product is sold to them. I doubt that it will be ignored far more than implemented.

A bank sold ULIP (obviously) to a 53 year old SPINSTER who had ageing parents -but the parent was covered by a huge pension and had enough wealth. She surely did not need insurance. However, when she died, the claim was denied. Without getting into the merits of the case, let me tell you that the bank did not even tell the insurer. The RM was busy selling another plan to some other client I presume. Yes of course the claim figure runs into 8 digits.

I seriously keep wondering what can we do to ……………..(fill in the blank)..