What is RIA (Registered Investment Advisor) in Mutual Funds?

Navigating the world of investments can feel like trying to find your way through a dense forest without a map. For those without financial expertise or time to track market trends, making sound investment choices can be daunting. That’s where a Registered Investment Advisor (RIA) comes in.

RIAs help investors align their mutual fund strategies with their financial goals through personalized, unbiased advice.

Origin of the RIA Model

The concept of RIAs stems from the Investment Advisers Act of 1940 in the U.S. In India, SEBI introduced RIAs formally through the Investment Advisers Regulations, 2013. These rules aim to protect investors by requiring advisors to act in their client's best interests.

Now, with the SEBI (Investment Advisers) (Second Amendment) Regulations, 2024, the regulatory framework has been further strengthened to increase transparency and integrity in the advisory ecosystem.

What Is RIA in Mutual Funds?

A Registered Investment Advisor (RIA) in mutual funds is a person or firm registered with SEBI to provide investment advice and manage portfolios. Unlike mutual fund distributors who earn commissions, RIAs follow a fiduciary standard, legally obligated to prioritize the client’s financial interest.

Think of them as your financial mentor, whether you’re building wealth, saving for retirement, or planning a large purchase.

RIA Meaning in Mutual Funds

In mutual funds, an RIA ensures that your investment plan is:

• Tailored to your goals.

• Unbiased and transparent.

• Based on market expertise.

What Is the RIA Code in Mutual Funds?

An RIA code is a unique number issued by SEBI to each Registered Investment Advisor. It acts as proof that the advisor meets all regulatory requirements and is authorized to operate.

Why is the RIA Code Important?

The RIA code is important due to the following reasons

1. Authenticity : Confirms legitimacy and registration.

2. Transparency : Enables clients to verify advisor credentials on SEBI’s portal.

3. Ethical Standards : Ensures advisors act in clients’ best interests.

How to Get an RIA Code in Mutual Funds?

To get an RIA Code in Mutual Funds, the following points should be fulfilled:

1. Fulfil Eligibility Criteria

• Postgraduate degree in finance or certifications like CFP/CFA.

• Firms must have at least 5 years of financial services experience.

2. Complete Required Certifications

• Clear NISM Series X-A & X-B.

3. Submit Application

• File Form A with SEBI detailing qualifications, services, and business plans.

4. Pay Registration Fees

• Varies for individuals and firms.

5. New: Maintain Deposit Instead of Net Worth

As per SEBI's 2024 amendment, RIAs must now maintain a deposit (not net worth), as per the client base:

• Up to 150 clients – ₹1 lakh

• 151–300 clients – ₹2 lakhs

• 301–500 clients – ₹3 lakhs

• Above 500 clients – ₹5 lakhs

The amount must be deposited in a scheduled bank and lien-marked in favor of the IAASB.

What Does an RIA in Mutual Funds Do?

An RIA in Mutual Funds performs the following activities:

1. Understand Client Goals

• Assess goals like wealth building, education, or retirement.

• Evaluate time horizon and risk appetite.

2. Create Custom Investment Plans

• Recommend mutual funds aligned with goals and market conditions.

3. Monitor and Rebalance

• Track performance and rebalance portfolios when needed.

4. Ensure Transparency

• Clearly explain advisory charges and any conflicts of interest.

5. Educate Clients

• Help clients understand mutual fund dynamics and regulations.

Updates Aligned with SEBI’s Latest 2024 Amendment

The latest SEBI’s 2024 amendments are as follows:

1. Revised Definition of Investment Advice

Old: Investment advice included guidance on “investment products.”

New: Now limited to “securities” only like mutual funds, shares, bonds, etc. Insurance and other non-security products are excluded from the advisory scope.

2. Introduction of Part-Time Investment Advisers (PTIA)

A new class of RIAs, PTIAs can offer investment advice while working in other professions (non-conflicting).

Limit: Maximum 75 clients at a time.

Mandatory Disclosure: They must clearly inform clients of their part-time status.

3. Shift from Net Worth to Deposit Requirement

Old: RIAs needed a minimum net worth (₹1 lakh for individuals, ₹25 lakhs for firms).

New: Now replaced by a refundable deposit with a scheduled commercial bank, tiered as follows:

• Up to 150 clients: ₹1 lakh

• 151–300 clients: ₹2 lakhs

• 301–500 clients: ₹3 lakhs

• More than 500 clients: ₹5 lakhs

This deposit is lien-marked in favor of the IAASB (Investment Adviser Administration and Supervisory Body).

4. Regulation of AI and Digital Tools

RIAs using AI-driven tools must:

• Disclose their use to clients.

• Ensure data security, integrity, and confidentiality.

• Take full responsibility for advice generated via AI.

RIA vs Mutual Fund Distributor: Key Differences

Why Should You Choose an RIA for Mutual Fund Investments?

If you're someone who:

• Struggles to pick the right mutual funds from hundreds of options,

• Wants to avoid biased recommendations based on commissions,

• Needs help aligning investments with long-term goals,

…then, working with a Registered Investment Advisor can be a game-changer. They act as your financial coach, providing expert insights, objective advice, and constant support.

How Zactor Can Help You with RIAs and Mutual Fund Planning

Whether you're working with a Registered Investment Advisor in mutual funds or navigating the investment world independently, Zactor makes financial planning simple and empowering.

With Zactor’s AI-powered personal finance platform, you can:

• Set Clear Financial Goals : Define objectives like buying a home, funding education, or retirement

• Get AI-Driven Insights : Understand your finances better with deep, actionable insights.

• Receive Smart Recommendations : Let Zactor guide you with tailored suggestions for investments, savings, and spending.

• Track Your Growth : Monitor your journey with intuitive dashboards and progress charts.

Start your financial journey with confidence. Download Zactor’s app from the Play Store or App Store.

Summing Up

With SEBI’s 2024 reforms, the RIA landscape is evolving to ensure more transparency, accountability, and investor protection. The introduction of PTIA roles, deposit-based licensing, and stricter AI regulations is aimed at boosting confidence in financial advisory services.

Whether you seek professional help from an RIA or prefer a tech-enabled path through platforms like Zactor, making the right financial decisions today can secure your tomorrow.

To learn more, explore Zactor’s informative finance blogs!