Investment Advisors Banned From Offering Free Trial; Debit/Credit Card Also Banned

The Securities and Exchange Board of India or SEBI has banned investment advisors from offering a free trial of their services.

Which investment advisors will be impacted by this decision?

Besides, the investment advisors have also been ordered to receive payments only via banking channels.

Checkout more details..

No Free Trial From Investment Advisors

SEBI has ordered all  SEBI Registered Investment Advisors (RIAs) that they should not offer free trials to their customers.

Partial payments or part payments have also been banned.

As per analysts, this decision will mainly impact stock tip advisors, who try to lure new customers by offering free trial.

Consent To Risk Profiling A Must

While issuing new guidelines, SEBI has mandated that every financial advisor authorized by SEBI must take consent of their clients, regarding risk profiling.

This consent has to be signed via physical document, and/or received in an email, before offering services.

Payment Only Via Banking Channels

The new rules from SEBI also mandate investment advisors to receive payments only via cheque, draft or direct bank account transfer.

Payments via cash and debit/credit cards are not allowed anymore.

It is now clear that these guidelines are meant to curb the aggresive marketing campaigns by stock tip advisors.

Suresh Sadgopan, founder, Ladder 7 Financial Advisories said, “The SEBI regulations are aimed at curbing the activities of stock tip providers who were offering free trials and introductory payment plans,

How Many Investment Advisors Will Be Affected?

There are a total of 1136 Investment Advisors, as authorized by SEBI in India, and the new guidelines directly affect their business operations.

At the same time, there are more than 1 lakh mutual fund distributors, who will not be affected by these new rules. Infact, these mutual fund distributors are authorized to offer advice that is incidental to their business of distribution, and this is a major advantage for them, compared to Investment Advisors. 

We will keep you updated, as more details come in.