Is Sharan Hegde’s new model of advisory business a test case for other finfluencers?

Sharan Hegde, a social media finfluencer with 6 million followers across various platforms, is the first in his field to obtain a Registered Investment Advisor (RIA) license. 

His popularity is evident in his goal to double his revenue to Rs 100 crore from selling educational courses alone by FY25, with new offerings like car and vacation courses. He also plans to hire 200 financial planners by FY26 for his separate advisory business.

Currently, Sharan runs his business under three brands—Finance with Sharan, The 1% Club, and Personal CFO. Finance with Sharan focuses on general awareness, The 1% Club offers specialized courses, and Personal CFO provides advisory services under the RIA license.

However, Sharan’s recent entry into the RIA business has put a spotlight on him, particularly when many in the industry are abandoning the RIA path. “A lot of people are giving up their licenses. When I took up the RIA license, I spoke to a lot of fintech founders, and all of them told me not to take it. So, if you ask me from a money-making perspective, an RIA license is not the best way to go. That is why you see a lot of VC-funded companies not even touching it,” said Hegde.

So, what made Sharan get the RIA license? “Because I’m already making money from my education business. I didn’t want to look at RIA as a money-making venture for me. I wanted it to be a customer satisfaction improvement business.” His current revenue from the education business is Rs 50 crore.

Currently, his RIA business, which he launched around three months ago, is just breaking even, with revenues and costs at around Rs 15 lakh per month. Hegde plans to scale up by hiring 200 financial planners by FY26. “For a meaningful business, we need at least 100 planners who can generate significant revenue,” explains Hegde. RIAs, both corporate and individual, sell direct plans to their customers and earn money by charging fees instead of commissions. As of March 2024, India has approximately 945 Sebi-regulated RIAs. This number is significantly lower, as SEBI Chairperson Madhabi Puri Buch stated last year that India needs one million RIAs, highlighting a significant gap in the market.

“In terms of having a meaningful business, I will need at least 100 financial planners. Every financial planner, let’s say, could handle 300 clients, and with the adoption of AI, that number can go up. But for now, let’s say it’s 300 clients, and let’s say each of those 300 clients is paying Rs 10,000 every year. Now, if I have 100 such people, I can make Rs 30 crore a year. After deducting expenses, I’ll be left with Rs 10 crore. So, for Rs 10 crore profitability, which is, I would say, a meaningful business, you need at least 100 financial planners. So even if you have 100 financial planners, you’re still going to make Rs 10 crore profits. So that is how difficult the RIA business is,” explained Hegde.

For income less than Rs 20 lakh per annum, Personal CFO (the advisory business) charges Rs 10,000 per annum. For income between Rs 20 lakh to Rs 30 lakh, the fee is Rs 15,000, and for income above Rs 30 lakh per annum, the fee is Rs 25,000. On renewal next year, the fee is half of that.

Hegde’s current RIA team consists of 8 advisors with MBA degrees and NISM certifications. He himself doesn’t have an RIA license as he chose to apply for a corporate RIA license instead of an individual one to focus on business growth and content creation rather than personal financial advising. “If I wanted the RIA license in my individual name, I’d need five years of personal financial advising experience. Instead, I decided to focus on content creation and business growth. SEBI doesn’t require RIA entity directors to hold the license personally, so I chose to scale faster rather than get the license in my own name. Now, actually, I’ll be getting the license as the director of the company. I can make my case that I’m getting the experience of running a financial planning services company. So I still have to wait for 5 years until I can get the license in my own name,” he added.

But there is also a concern among many that as a finfluencer, Hegde might be funneling customers into his RIA business. However, he clarified that customers are directed to his education business, which then advertises the RIA services. Hegde emphasized that Sebi has approved this method, as it does not involve direct advertisements using Hegde’s personal brand and his personal brand is not used in RIA promotions.

“The answer is no because I am funneling customers into my education business. And then my education business is putting an advertisement for the RIA business. Now, is this allowed as per Sebi? Yes, because we have asked Sebi’s permission for doing this. In fact, we have WhatsApp communications with BSE Administration and Supervision Ltd (BASL), which is the governing body for SEBI advertising guidelines, and we have openly asked them if we are allowed to do this. Do we need to take permission? And the representative has categorically told us with proof that we don’t need to take permission for this because it is not an outright advertisement. It is because in our app it is just the image, it is just a picture that says Personal CFO book a call. That’s it. There is no picture of me. There is no video of me telling to book a call. There is nothing of that sort. So my involvement is not there in that advertisement of the RIA business. I’m not there anywhere in the picture, so is my personal brand being used for the RIA business. The answer is no. But in the future, let’s say I run an ad with my face, then I will take permission from Sebi. So if I do that in the future where I use my face, then I will take permission from Sebi to do it,” added Hegde.

The Personal CFO business is not in Sharan’s name. He is the director of the company. The company that holds the RIA license is One Centurian Private Limited, a subsidiary of the parent company. He owns 70% of the parent company. “This distinction is important because, legally, the company is considered a separate entity. I do not personally hold the license. It is the company that has the license,” explained Hegde.

Lovaii Navlakhi, chairperson of the Association of Registered Investment Advisors (RIA), said, “One thing that Sebi has said clearly is regulated entities like us cannot deal with finfluencers. I can’t employ a finfluencer because of regulations. So, they have tried to control it that way. I don’t know how they will deal with this situation of the subsidiary, which is an RIA, using somebody else to get business here. It looks like, obviously, you have found a loophole. Then they’ll have to plug that loophole.”

Sebi declared tougher guidelines for financial influencers last month. During a presentation of the new framework, Madhabi Puri Buch, the chairperson of Sebi, emphasized the need to adhere to securities rules and encourage responsible financial education. “As you know, we have jurisdiction over entities that we regulate,” the chairperson remarked at an event. If entities do not come and register with us and are not a part of our ecosystem, we do not have jurisdiction over them. This means that the organizations that fall under our regulatory purview are now required to follow the rule that they are not allowed to affiliate with individuals who engage in the following two activities.

“One is if they are not registered investment advisors or research analysts, and yet they are giving investment advice or research analysis, then that’s an inappropriate activity. The second is irrespective of whether they are registered or unregistered. If they are making claims on portfolio performance, their service performance, etc., unless it is specifically provided for them to be able to give that information of performance, if they are making claims without that approval, then again, they are breaking the law,” said the chairperson.

Sharan Hegde is set to revolutionize the financial education and advisory landscape with his ambitious plans and customer-focused approach. It will also be a test case for the rest of the finfluencer industry as Sebi has become more stringent with finfluencer regulations.