Independent Financial Advisor (IFA)

Independent Financial Advisor (IFA)

How to become an Independent Financial Advisor (IFA)?


Before we understand  “How to become an Independent Financial Advisor(IFA)?” let’s first look at what is an Independent Financial Advisor?

Who is an Independent Financial Advisor (IFA)?

Independent Financial Advisors (IFA) are experts who advise clients about how to meet their financial goals. Clients can invest in mutual funds or any other type of financial product. In order to specialise in this sphere, advisors must be qualified and follow the rules of the finance industry. In this industry, financial advisors are also known as wealth managers or financial planners

AMFI (Association of Mutual Funds in India) and SEBI (Securities and Exchange Board of India) regulates the Finance industry. These organizations have taken measures to ensure the safety of investors. Acquiring AMFI Registration Number (ARN) is a compulsory step for IFAs. This rule is for all professionals who are involved in marketing and selling of mutual funds.

Along with getting the ARN, they also need to clear a National Institute of Securities Markets (NISM) certification and register with AMFI to obtain ARN. An ARN number is the identity of the financial advisor. This is used for tracking the assets that he has mobilized. Independent Financial Advisors (IFA) help in executing the process required for their clients with the aide of their ARN numbers.

SEBI Regulations for IFAs

SEBI preserves financial sanctity and it has several regulations for maintaining it. SEBI Regulations are necessary for Investment Advisors. It specifies the preconditions for certification, registration, capital adequacy, suitability, risk profiling disclosures, code of conduct and documentation. SEBI lays down the rules and regulations and mentions that no one can play the role of a financial advisor who is not SEBI certified.

Who can be an IFA in India?

For being an IFA in India, it would be beneficial if you are a skilled marketer. This would help in establishing, building and maintaining relationships with clients. One needs to gauge their area of interest and then appear for the certification exam.  NISM Series V-A Mutual Funds Distributors certification can be obtained from the National Institute of Securities Market (NISM) for becoming an independent financial advisor.

Who is qualified to be an Independent Financial Advisor?

Independent Financial Advisors can be post-graduates, graduates who are professionally qualified like CFAs, CAs, CFPs, and MBAs, engineers. They can also be ex-bankers or ex-servicemen. Certification in business management, accountancy, and finance increase the chances of becoming a successful financial advisor.

To be an IFA, one can have relevant experience in a customer service, sales or financial services setting. This can have a positive impact on this kind of career choice. New entrants often start in a bank and study part-time, learning alongside experienced advisors. Entering this segment is easy if one starts off as a  para-planner. A para-planner can act as an aid to a financial planner and provide research and administrative inputs to a financial advisor.

Fees charged by an IFA

An IFA on an average earns a salary of Rs. 362,193 per annum. Relevant experience plays an important role in getting a good salary package. The pay package includes commissions, profit sharing, and bonus. It comes to somewhere between Rs. 175,916 and Rs. 1,414,769 annually.

What are the benefits of being an IFA?

Independent financial advisors have a vast canvas to work upon. A particular financial product or a family of funds cannot limit their scope of work. Clients can enjoy flexibility. They can pick and plan as per their requirement of whether to select a tax exemption, buy an estate, manage assets etc. Independent advisors too can customize solutions.

These solutions can be selected freely from a number of investment options to suit the requirement of the client. Be it mutual funds or stock markets or even investment banking, both parties can take advantage of the flexibility. Large working space and this kind of a symbiotic relationship are beneficial for all the parties involved.

The professional life of an IFA:

The professional life of an IFA revolves around a lot of financial research and documentation. Independent financial advisors recommend investment services and products to their clients. Their recommendation is based on their resources, objectives, risk profile, time horizon, and preferences.

IFAs execute and implement:

  • Financial planning,
  • Investment planning
  • Income tax and tax planning
  • Estate planning
  • Debt management

Their financial advice helps clients build their own financial portfolio and thereby expand gains. The IFA assists clients to make informed decisions. They help clients remain abreast of fiscal legislation, develop financial reports and conduct research for new financial products.


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NISM XB Investment Adviser Level 2 – Question Bank

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