Implementation services

Giving advice is one thing. Actually buying or selling what was recommended is a separate step, and someone has to do it.

Implementation services are that separate step. An Investment Adviser may offer to execute the advice they have given — placing the actual trades or applications in the securities market on the client's behalf.

The client is never obliged to use this. Nothing stops a client from taking the advice and executing it themselves, or through someone else entirely.

SEBI's rules put a firm limit on this service: an Investment Adviser shall not charge any implementation fee — that is, Rs 0 — from the client for it, whether directly or indirectly, at the adviser's own level or at the level of their group or family. No commission or referral fee, embedded or otherwise, may be received for it either.

Where the adviser does offer implementation services, they must be provided only through direct schemes or products in the securities market, never through a regular, commission-paying route, so that the adviser's advisory fee stays the only compensation earned from the client relationship.

An Investment Adviser recommends a client invest Rs 10,00,000 in a specific mutual fund scheme, then offers to place the actual purchase order for the client's convenience. Because this is an implementation service, the adviser can only route it through the fund's direct plan, and cannot charge the client anything extra, or earn any commission from the fund house, for doing so.

Had the adviser instead directed the same investment through a regular plan and pocketed the trail commission on it, that would breach the rule — the client's Rs 10,00,000 would effectively be paying two ways for a service the adviser is supposed to provide for free.

Chapter 18 (Key Regulations), section 18.6.16 (Implementation of advice or execution), states the no-fee, direct-scheme-only rule for implementation services. Expect a question on whether an adviser may charge for implementation services, or one on which route, direct or regular, must be used when offering them.

• No fee or commission of any kind is permitted for implementation services — not from the client directly, and not embedded in the product via a regular plan.
• Only direct schemes or products may be used if the adviser does offer this service — routing through a regular, commission-bearing plan breaches the rule even if no separate fee is charged.
• The client is never obliged to use the adviser's implementation service — declining it does not affect the advisory relationship.