M. Pattabiraman, a professor of physics at IIT Madras, teaches complex theories to eager students. Beyond the classroom, he is also a well-known figure in the field of personal finance, with nine of his financial calculators listed on the Securities and Exchange Board of India’s (Sebi) investor education site.
Also meet Vijay Malik, a physician who practiced for five years but went on to become a successful equity research analyst and now runs a popular blog under his name and holds a Research Analyst (RA) license.
These stories highlight an emerging trend: professionals such as teachers, doctors and engineers taking on the roles of part-time investment advisors or research analysts.
The market regulator does not allow people who practice other professions full-time to obtain investment advisor (IA) or research analyst (RA) licenses. This has prevented many experienced professionals from offering investment advisory and research services.
However, in a recent consultation paper, Sebi proposed the concept of a part-time investment adviser and research analyst.
Becoming a part-time investment advisor
The requirement to become a part-time investment advisor would be the same as that of a full-time advisor. While all other requirements remain largely the same, there is a maximum limit of 75 clients.
These qualification requirements will prevent anyone from offering investment advice for a fee.
Read also: Becoming an investment advisor will become easier and easier
The requirements to become an audit consultant or part-time audit consultant are similar to those for full-time consultants. Applicants must have a finance-related degree, a NISM graduate degree, or a CFA certification. In addition, they must pass NISM exams 10-A and 10-B.
If working in another full-time position, the applicant must obtain a no-objection certificate from his or her employer when applying for this job.
Who is left out?
The market regulator said those already working in the securities field and handling people’s money, such as brokers, mutual fund distributors, PMS/AIF distributors and real estate agents, can refrain from becoming part-time investment advisers.
If the applicant is engaged in an activity that is under the supervision of a self-regulatory organisation such as the Institute of Chartered Accountants of India (ICAI) and the Insurance Regulatory and Development Authority of India (Irdai), he or she will be allowed to become an investment adviser. Therefore, CAs and insurance agents would be able to become investment advisers or part-time investment advisers under the proposed regulations.
Harsh Roongta, RIA and founder of fee-only, says those involved in the securities field should also be allowed to become AI/AR to create a level playing field.
Career transition
The concept of part-time advisors will make it easier for many professionals to change careers, said Vishal Dhawan, founder of Plan Ahead Advisors.
Consider an engineer who can leverage his or her mathematical expertise to become an AI/RA. Under current rules, the engineer cannot obtain the AI/RA license without quitting his or her full-time job and devoting himself or herself to the new venture. However, if the proposed rules for part-time AI/RA are finalized, the engineer could pursue this activity part-time first. This approach allows the engineer to test the waters and move into full-time research or investment consulting.
What do today’s RIA/RAs think?
Existing investment advisors have mixed views on Sebi’s new proposal. While a professional can provide investment advice as a part-time job, it would be almost impossible to manage a complete financial plan. “A part-time investment advisor can only provide information on which mutual fund to buy, but it would be almost impossible if he started making financial plans for 50 clients,” said Dhawan.
Read also: Reforms in the regulation of internal audits: the dangers of introducing part-time consultants
On the other hand, Suresh Sadagopan, founder of ladder7 Wealth Advisor, believes that the proposals need to be reviewed. “Can someone who is already engaged in other activities or has other professions or jobs have the capacity to provide investment advice professionally?”
As the consultation process progresses, it is clear that Sebi’s proposal could open doors for many professionals looking for a career change. It remains to be seen whether this will lead to an increase in part-time advisers or create new challenges in the industry.
Read also: How Sebi reforms could transform India’s investment advisory landscape
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