Photo: iStock
Photo: iStock

Who a retirement adviser is under the National Pension System

Read on to understand in detail the qualifications of retirement advisers and their role

Under the National Pension System (NPS), institutions such as banks play the role of distributors or points of presence (PoP) as the NPS architecture calls them. A PoP is simply a point of sales that allows you to open an NPS account and then services the account by accepting contributions or helping you switch funds. Retirement advisers, on the other hand, are entrusted to advise you. They work in a fiduciary capacity, apart from assisting you with services under NPS.

Read on to understand in detail the qualifications of retirement advisers and their role.

A retirement adviser can be an individual, firm, corporate body, registered Trust or a society wanting to help potential subscribers open an NPS account or give advisory services to existing subscribers. The minimum qualification for being a retirement adviser is a graduation in any discipline. The entity or the individual will also have to be certified by the National Institute of Securities Markets (NISM), which is accredited by the Pension Fund Regulatory and Development Authority (PFRDA). This certificate is valid for 3 years. For certified financial planners (CFPs) and investment advisers registered with the Securities and Exchange Board of India (Sebi), the certificate is not mandatory. But retirement advisers need to get registered with PFRDA. Retirement advisers need to ensure that their advisory services are segregated from their other activities.

In the case of professionals such as lawyers and chartered accountants who provide retirement advice incidental to their practice, or entities already regulated by the PFRDA, this registration is not needed.

The primary role of a retirement adviser is to advise subscribers on NPS, help them come on board and assist them with other services under NPS. In terms of adviser services, retirement advisers need to do a risk profiling of the customers and collect and maintain records of all the necessary details such as age, marital status, number of dependants and information around assets and liabilities. They will have to analyse the current financial situation, recommend asset allocation and identify the goals. They will also help their clients make decisions about contributions, asset allocations and selection of pension funds in NPS by analysing different funds. They need to provide comparison of the returns of different funds of all the pension fund managers.

In terms of facilitating clients to invest in NPS, retirement advisers will need to tie up with PoPs to facilitate the on-boarding process and for subsequent transactions. Or they could simply help the clients open NPS account online.

The charges levied by a retirement adviser are over and above the charges that the PoP levies. The upper ceiling for on-boarding is Rs120 and for any subsequent services, like address change or fund manager change, the individual retirement adviser can charge up to Rs20 per transaction or a maximum of Rs100 annually. Over and above this, the regulations allow retirement advisers to charge an advisory fee. This can be up to 0.02% of the assets under management (AUM) of the subscriber being handled by the adviser, subject to a minimum of Rs100 and maximum of Rs1,000 per year.