Financial Planning

Investment advisory in India was fragmented for a long period of time. In the 1990s and early 2000s, most people relied on brokers, mutual fund distributors and insurance agents, but more for making investments rather than for seeking advice. The other set of advisors by default were chartered accountants, who while helping individuals file their tax returns also informed them about investments that could reduce the tax liability. Until then, the most sold products were insurance policies and bank fixed deposits.

It was only in the mid-2000s that financial advisory entered India, with the Financial Planning Standards Board spreading its wings beyond the US to issue certified financial planner (CFP) certificates. When FPSB came to India in 2004, the concept of financial planning took center stage, especially after 2007 when the Securities and Exchange Board of India (Sebi) allowed direct retail investments in mutual funds.

It was much later in 2013 that Sebi floated the concept of Sebi-registered financial advisors, who are now among the most trusted individuals for disseminating financial advice.

Still, India remains massively underadvised though the appetite for investments has gone up manifold. After 10 years since the inception of Sebi RIAS, there are only 1,331 RIAS in India against at least 120 million demat account holders and a little over 150 million mutual fund folios, as on July 13, 2023, according to the latest data. There are 139,764 MFDs in India as on June 30, 2023. To know more about financial advisory in India, read our freedom special (bit.ly/3Eoajrv).

Little wonder that holistic financial advice still eludes a large chunk of Indian investors, especially in tier II and tier II cities, who remain dependent on brokers, agents, CAS, bank managers, and even financial influencers or finfluencers.

The latter are now under Sebi's scrutiny. In a recent interaction, Sebi chairperson Madhabi Puri Buch indicated that some regulatory measures for financial influencers are in the offing. Moreover, the Advertising Standards Council of India (ASCI) recently made it mandatory for finfluencers to register with Sebi or the Insurance Regulatory and Development Authority of India (Irdai), depending on the kind of advice they were providing.

The Way Forward