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Chairman of the Securities and Exchange Board of India (SEBI), Tuhin Kanta Pandey, on Monday highlighted key challenges facing the investment advisory ecosystem and outlined the regulator's roadmap to strengthen investor protection and improve the advisory framework.
Addressing the ARIA Aspire 2026 conference, Pandey noted that India's financial system has made significant progress in financial inclusion, but the next stage must focus on financial empowerment through unbiased and trustworthy financial advice. Pandey expressed concern over the declining number of registered investment advisers (IAs) despite a rapid increase in the investor base. "It is a matter of concern that the number of registered investment advisers has declined since 2021." Pandey said Currently, India has around 1,000 registered investment advisers, including about 470 individuals and 530 non-individual entities. He cautioned that if the number of regulated advisers does not grow in line with the expanding market, the gap could be filled by unregulated voices such as financial influencers. "As India's investor base expands rapidly, our market needs more regulated advisers. Otherwise, the gap will be filled by unregulated voices - like finfluencers - who present opinion as expertise and speculation as strategy." Pandey added. Citing SEBI's Investor Survey, the chairman said nearly 62 per cent of prospective investors are influenced by "finfluencers", who often present opinions as expertise and speculation as investment strategy. Such trends, he said, can distort investor behaviour and weaken market discipline. Pandey also pointed out that many investors still prefer free recommendations rather than paying for professional financial advice, reflecting a cultural shift that is still evolving in India's investment ecosystem. Another emerging challenge, according to the SEBI chief, is the growing role of artificial intelligence in financial advisory services. While AI can process large volumes of data, support risk profiling and deliver standardised recommendations at lower cost, he stressed that investment advice ultimately requires human judgment, context and trust. Outlining SEBI's regulatory approach, Pandey said the regulator aims to remain firm where investor protection is necessary while simplifying compliance wherever possible. Several steps have already been taken to make the advisory ecosystem more accessible, including relaxation of eligibility and documentation requirements, easier transition from individual to non-individual entities and simplified registration processes. He added that registered advisers have also been given greater operational flexibility, such as the ability to share certified past performance data with clients and collect advance fees with client consent. The operationalisation of the Past Risk and Return Verification Agency (PaRRVA) is expected to strengthen verification of performance data. On the governance front, SEBI has mandated disclosure of the use of artificial intelligence tools in the advisory process and proper recording of client consent where services are provided through telephone calls. The regulator has also introduced mandatory disclosure of "Most Important Terms and Conditions" in advisory agreements to improve transparency. Looking ahead, the SEBI chairman announced that a working group has been set up to review the regulatory framework for mutual fund distributors and examine possible overlaps with investment advisers. A common advertisement code for intermediaries is also being developed to improve consistency in market communication. He also revealed that SEBI is developing a digital platform called "SEBI SETU" to provide end-to-end regulatory guidance to investment advisers, covering processes from registration to ongoing compliance. In addition, a standardised light-touch penalty framework is being worked out to promote transparency and encourage compliance. Pandey emphasised that investment advisers must remain true to their fiduciary role and help build a culture of responsible investing. He urged advisers to promote investor awareness on fraud and cyber risks and maintain high standards of governance and transparency. "Technology will continue to improve, and investor expectations will rise. Advisers who combine technology with trust and knowledge with judgment will remain highly relevant," he said. Pandey added that as India's capital markets continue to grow in scale and participation, sound financial advice will play a crucial role in helping investors participate in the country's growth story with confidence and discipline. (ANI)
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