Could Sebi’s curbs for investment advisers choke financial planning in India?

livemint.com:

Mintthat if these proposals are approved, it would mean the death of financial planning in India. In a recent consultation paper, the market regulator proposed that investment advisers shall not provide services/products such as tax planning, estate planning, loan management, real estate, gold, and bitcoin under the IA licence. The reason: such products are not regulated, at least not by Sebi, and thus might not be scrutinised enough.

Sebi thinks it will be difficult for it to resolve client complaints related to such offerings. Also read | How Sebi’s reforms could transform India’s investment advisory landscape For products regulated by a financial regulator other than Sebi, investment advisers can continue to provide such services given that any grievances shall be dealt by the other regulators and not Sebi. Grievances related to fixed deposits by the Reserve Bank of India, to the National Pension Scheme by the Pension Fund Regulatory and Development Authority, and insurance schemes by the Insurance Regulatory and Development Authority.

In a way, Sebi wants to steer clear of anything unregulated or regulated by some other authority. To be sure, registered investment advisers can still give broad asset allocation advice such as to invest 20% of a person’s savings in gold or 15% in real estate. But if they want to actively advise on such assets or handle tax planning, Sebi doesn’t want them to under the IA licence.

When the IA regulations were formulated in 2013, Sebi included the word ‘financial planning’ as a subset of investment advice. Due to this, many people opted for the IA licence with the sole purpose of providing 360-degree financial planning. Now, Sebi wants to remove the term ‘financial planning’ and advisers