"Indian markets lack an advisory ecosystem but SEBI is now making...': Zerodha Nithin Kamath

Zerodha co-founder and CEO Nithin Kamath, in a recent post on X (formerly Twitter), highlighted a significant challenge facing the Indian markets: the lack of a robust advisory ecosystem.

Kamath pointed out that while the number of unique investors has seen a dramatic increase from about 3 crore in 2020 to 10 crore today, the growth in the number of Registered Investment Advisors (RIAs) has not kept pace. In fact, the number of RIAs appears to be decreasing, he said.

"We just have about 900 odd RIAs, and not all of them do holistic advisory, and if you only consider these, the number drops to less than half. That's a few hundred RIAs for 10 crore investors," Kamath wrote.

He further noted that although the number of mutual fund distributors is around 2.7 lakh, yet this figure is still insufficient to meet the demand.

"For a broad comparison, there are over 27 lakh+ insurance agents. As our markets continue to grow, the number of advisors has to grow exponentially to help new investors," he wrote.

Kamath said that SEBI has proposed several changes in a new consultation paper aimed at making it easier for individuals to become RIAs.

"If these proposed changes become final, it'll go a long way toward increasing the number of individuals wanting to become advisors," he added.

One of the biggest challenges for the Indian markets is the lack of an advisory ecosystem. While the number of unique investors has grown from about 3 crore in 2020 to 10 crore today, the number of RIAs has barely grown. If anything, the number of RIAs seems to be decreasing.

We…

— Nithin Kamath (@Nithin0dha) August 7, 2024

Netizens reaction

Since being shared, Kamath's post has garnered over 60,000 views, and many people have taken to the comment section to share their thoughts.

When we are sick we go to good doctor similarly when we require good returns we will go to RIA.

Onboarding more RIA will help to boost healthy competition among them to deliver more returns for their clients.

— Neetu Khandelwal (@T_Investor_) August 7, 2024

"This is such a great news I would love to register and get qualified as RIA," a user wrote. 

"One of the main problems I have observed working in finance in India is that many customers don’t like paying for advice however good. It’s not tangible and hence they feel it’s a waste of money," another highlighted.

Many aspire to register as RIAs/IAs to provide regulated services, but the absurd requirements - like five years of experience or a net worth certificate - make it hardly worth the effort.

One certification exam should be enough.

— StoxMentor | The Stock Market Guide (@StoxMentor) August 7, 2024

"The problem lies in the incentive to be a RIA. SEBI caps the fees that can be charged which disincentivises most to choose it as a career. How SEBI has found out a way to open the doors wider, it also needs to find reasons for people to come in," a third added.