This is the very common questions asked by any the SEBI registered Investment Adviser or any persons who are willing to take the SEBI licence for starting an advisory or research analyst services.
Before going to the Investment adviser commission discussion let me show you the clarification seek from the SEBI side w.r.t the SEBI research analyst license. We applied for the SEBI research analyst licence as a partner and we both are registered with stock exchanges on behalf of my brokers and I am also registered with AMFI as a Mutual funds distributor.
On 4th of April 2022 I received 1st clarifications objection from the SEBI RA wing after that I received another clarification objection and it is clearly mentioned that you are suppose to surrender your all registrations with SE (Stock Exchanges) as AP (Authorized Partner) and AMFI and the same we did and submit the proof to the SEBI before 15 days to process our Research analyst applications.
So, In simple term you are not suppose to do research analyst and distribution services at a single point of time.
Coming to and Investment advisory part the SEBI already discussed about the fees for Investment Advisory Services, and it is described below:
Fees
Regulation 15 A of the amended IA Regulations provide that Investment Advisers shall be entitled to charge fees from a client in the manner as specified by SEBI, accordingly Investment Advisers shall charge fees from the clients in either of the two modes:
(A) Assets under Advice (AUA) mode
- The maximum fees that may be charged under this mode shall not exceed 2.5 percent of AUA per annum per client across all services offered by IA.
- IA shall be required to demonstrate AUA with supporting documents like demat statements, unit statements etc. of the client.
- Any portion of AUA held by the client under any pre-existing distribution arrangement with any entity shall be deducted from AUA for the purpose of charging fee by the IA.
(B) Fixed fee mode
- The maximum fees that may be charged under this mode shall not exceed INR 1,25,000 per annum per client across all services offered by IA.
General conditions under both modes (AUA mode and Fixed fee mode)
- In case “family of client” is reckoned as a single client, the fee as referred above shall be charged per “family of client”.
- IA shall charge fees from a client under any one mode i.e. (A) or (B) on an annual basis. The change of mode shall be effected only after 12 months of on boarding/last change of mode.
- If agreed by the client, IA may charge fees in advance. However, such advance shall not exceed fees for 2 quarters.
- In the event of pre-mature termination of the IA services in terms of agreement, the client shall be refunded the fees for unexpired period. However, IA may retain a maximum breakage fee of not greater than one quarter fee.
In Asset Under Advice (AUA mode) you have to advice direct investments products to your Investors and based on the agreed fees between You and Your Investors which is not greater that 2.5% of the AUA, you can charge from an Investors.
Hope this article helps you to understand the things you need to know.