How to Build a Fee-Only Investment Advisory Practice in

How to Build a Fee-Only Investment Advisory Practice in India From Scratch

Starting a fee-only advisory practice isn't simply a business decision to stop taking distributor commission — it's a defined regulatory pathway with specific qualification, capital, and compliance-infrastructure requirements that need to be built correctly before the first client agreement is even signed.

Step 1: Decide the Registration Structure — Individual or Non-Individual

SEBI permits IA registration either as an individual or as a non-individual entity (company or LLP), each carrying different net worth and structural obligations. An individual IA faces a lighter net worth threshold but caps on the number of clients the individual can serve without engaging additional qualified personnel; a non-individual (corporate) registration carries a higher net worth requirement (₹50 lakh, per SEBI's current framework) but offers more structural flexibility to scale the practice with a team.

Step 2: Meet the Qualification and Certification Requirements

Every individual providing investment advice — whether registered individually or as part of a non-individual entity — must satisfy SEBI's prescribed qualification and NISM certification requirements specific to investment advisory. This isn't a one-time exam; NISM certifications typically carry validity periods requiring periodic renewal, meaning ongoing certification currency is itself a standing compliance obligation, not a box ticked once at registration.

Step 3: Satisfy the Net Worth or Deposit Requirement

Non-individual IAs must maintain the prescribed net worth (currently ₹50 lakh under SEBI's framework), computed as paid-up capital plus free reserves, net of specified deductions.
All IAs (individual and non-individual) are additionally required to maintain a deposit, the quantum of which scales with the maximum number of clients served in the previous financial year — maintained in the form of units of a liquid or overnight mutual fund, or as a bank deposit, and marked as lien in favour of IAASB. This deposit requirement means a growing practice needs to actively track its client count and correspondingly scale its deposit, not treat it as a static, one-time figure.

Step 4: Enlist With IAASB

As covered elsewhere in this series, enlistment with IAASB (currently administered through BSE) is now a required part of the registration pathway — including submission of the required documentation and, where applicable, arrangements for the CeFCoM fee collection mechanism if the practice chooses to use it.

Step 5: Build the Core Compliance Infrastructure Before Onboarding Any Client

Risk profiling and suitability assessment templates, genuinely tailored to the client segments the practice intends to serve, not generic boilerplate.
Client agreements incorporating the Most Important Terms and Conditions (MITC) framework, correctly disclosed and documented.
A defined, compliant fee structure — fixed fee (capped at ₹1,51,000 per annum per family, subject to periodic revision) or AUA-based (capped at 2.5% per annum), with a clear, documented process for calculating and disclosing Assets Under Advice correctly.
A conflict-of-interest and segregation policy, particularly important if any principals or associated persons have any connection to distribution activity, given the strict segregation SEBI's framework requires between advisory and commission-earning distribution.
Record-keeping systems capable of retaining client risk profiles, advice given, and fee records for the periods SEBI requires.

Step 6: Build the Client Acquisition Approach Within Advertising Code Limits

Marketing and client acquisition must comply with SEBI's Advertisement Code for IAs — covering what can and can't be claimed in promotional material, mandatory disclosures (registration number, compliance officer details), and restrictions on performance-guarantee-adjacent language. This is a genuinely distinct compliance workstream from the advisory function itself and deserves dedicated attention before any marketing material goes live.

Why Starting Fee-Only From Scratch Is Different From Transitioning

A practice built fee-only from the outset avoids the specific transition challenges (existing commission relationships, client communication about a fee-structure change) that a firm moving from commission-based distribution faces — but it still needs the full weight of registration, capital, and compliance infrastructure built correctly before day one, since there's no existing client base or revenue cushion to lean on during the build-out period.

Why This Matters

Building a compliant fee-only advisory practice from scratch is a genuinely structured, multi-step regulatory process — registration category, qualification, net worth/deposit, IAASB enlistment, and a full compliance infrastructure build — not simply a decision to "go fee-only" and start advising.

How Anuj Desai & Associates Can Help

We support the entire IA registration and compliance build-out process — from choosing the right registration structure and meeting net worth/deposit requirements, to building suitability documentation, fee structuring, and Advertisement Code-compliant marketing frameworks. If you're building a fee-only advisory practice from scratch, we can help you get every piece of the compliance foundation right from day one.

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How to Build a Fee-Only Investment Advisory Practice in India From Scratch