Mumbai (Maharashtra)

Tuhin Kanta Pandey, Chairman of the Securities and Exchange Board of India (SEBI), on Monday highlighted key challenges in India’s investment advisory sector and outlined measures the regulator is taking to strengthen investor protection and enhance the advisory framework.

Speaking at the ARIA Aspire 2026 conference, Pandey noted that while India has made notable strides in financial inclusion, the next phase must focus on financial empowerment through reliable and unbiased advisory services.

He expressed concern over the declining number of registered investment advisers (IAs) despite the growing investor base. “It is worrying that the number of registered advisers has been falling since 2021,” he said. Currently, India has around 1,000 registered investment advisers, including approximately 470 individuals and 530 non-individual entities. Pandey warned that if the growth of regulated advisers does not keep pace with market expansion, unregulated voices like financial influencers (finfluencers) may fill the gap, often presenting opinions as expertise and speculation as strategy.

Citing SEBI’s Investor Survey, he pointed out that around 62% of prospective investors are influenced by finfluencers, which can distort investment decisions and undermine market discipline. He also noted that many investors still prefer free advice over professional paid recommendations, reflecting a cultural shift that is still evolving in India’s investment ecosystem.

Another challenge he highlighted is the increasing use of artificial intelligence (AI) in financial advisory services. While AI can process large datasets, support risk profiling, and provide standardized recommendations efficiently, Pandey stressed that human judgment, context, and trust remain indispensable in providing financial advice.

Outlining SEBI’s regulatory approach, Pandey emphasized a balanced strategy—being firm where investor protection is needed while simplifying compliance wherever possible. Several measures have already been implemented to make the advisory ecosystem more accessible, including relaxed eligibility and documentation requirements, simplified registration processes, and easier transitions from individual to non-individual entities.

Registered advisers have been granted greater operational flexibility, such as sharing certified past performance data with clients and collecting advance fees with client consent. The Past Risk and Return Verification Agency (PaRRVA) is expected to strengthen the verification of performance information.

On governance, SEBI has made it mandatory for advisers to disclose the use of AI tools in their services and to obtain proper client consent when services are provided over the phone. Additionally, advisers must include “Most Important Terms and Conditions” in agreements to improve transparency.

Looking ahead, SEBI has formed a working group to review the regulatory framework for mutual fund distributors and examine overlaps with investment advisers. A common advertising code for market intermediaries is also being developed to ensure consistency. Furthermore, SEBI is creating a digital platform called “SEBI SETU” to guide advisers through the complete regulatory process, from registration to ongoing compliance. A standardized light-touch penalty framework is also in the works to promote compliance and transparency.

READ MORE: An officer can't afford to go wrong, says top cop Ajeetha Begum

Pandey underscored that investment advisers must uphold their fiduciary responsibilities, foster a culture of responsible investing, raise awareness about fraud and cyber risks, and maintain high standards of governance and transparency.

“Technology will continue to advance, and investor expectations will rise. Advisers who combine technology with trust, and knowledge with judgment, will remain highly relevant,” he said. He added that as India’s capital markets grow in scale and participation, sound financial advice will be critical in helping investors participate confidently and responsibly in the country’s growth story.