Financial Planner Fees in India: What You Pay

In short: in India you pay for financial advice in one of three ways: a fixed fee, a percentage of the assets advised on, or commission built into the products you buy. For advice on SEBI-regulated investments, a SEBI Registered Investment Adviser (RIA) may charge an individual or family at most ₹1,51,000 a year as a fixed fee, or at most 2.5% a year of the assets it advises on, with GST on top. Many charge less. Commission does not appear on any invoice, but you still pay it through the product's costs.

The fair way to compare is the total yearly cost of each route, for your portfolio, for the service you actually receive. This article shows how to work that out.

Three ways to pay for financial advice

The first two are what SEBI allows a registered investment adviser to charge. The third is how distributors and agents are paid. Our guide What is a fee-only financial planner in India? explains each model and the conflicts each can create. This article is about the money.

What SEBI allows a registered adviser to charge

SEBI's rules for investment advisers set upper limits, not prices. For individual and HUF clients (other than accredited investors), the limits cover advice on SEBI-regulated investments, such as mutual funds and shares, and an adviser charges in one of two fee modes:

A few rules decide how the fee reaches you:

• Taxes are charged on top. SEBI's limits exclude statutory charges, and advisory fees attract GST, currently 18%. A quoted fee of ₹10,000 plus GST costs you ₹11,800.
• Advance fees are capped at one year. With your consent, an adviser may collect fees in advance for up to one year at a time.
• Leaving early is refunded. If you end the engagement early, the adviser refunds the unexpired fee and may keep a breakage fee of at most one quarter's fee.
• No cash. Fees are paid by cheque, bank transfer or UPI.
• Agreement first. The adviser must sign an agreement with you, setting out the fee, before giving any advice or charging any fee, and give you a signed copy.
• "Family" is one client. You, your dependent spouse, dependent children and dependent parents count as one family for these limits.

Many advisers charge less than the limits. They are still worth knowing: a quote above them for advice on SEBI-regulated investments is worth questioning.

What each route costs in a year

A worked example, for illustration only. The figures below are assumptions, not quotes from any adviser and not projections. Suppose:

• a fixed fee of ₹25,000 a year, plus 18% GST
• an AUA fee of 1% a year, plus 18% GST
• a commission route where the regular plans you buy cost 1 percentage point a year more than the direct plans of the same funds

Three things stand out:

1. A fixed fee costs more on small portfolios and less on large ones. In this example the fixed fee and the AUA fee cost the same at ₹25 lakh. Below that, the percentage fee is cheaper. Above it, the fixed fee is.
2. Commission is not free. It is paid every year, out of the fund's expenses, and rises as your investments grow. It never arrives as a bill. Your consolidated account statement (CAS) shows the commission paid on your mutual fund holdings, which is the place to look it up.
3. The gap compounds. A cost deducted from your investments every year also loses the growth that money would have earned. Over 20 years, a 1-percentage-point yearly difference on ₹10 lakh can cost more than the ₹10 lakh itself (assuming, for illustration only, 10% a year growth before the cost against 9% after); our fee-only guide works through that example.

Your own numbers will differ. The direct-versus-regular cost gap varies from fund to fund. Fund houses publish the expense ratio of both plans, so you can check the funds you hold.

What a fee does not cover

An adviser's fee pays for advice. You still pay other costs, whichever route you choose:

• Fund expense ratios. Direct plans have lower costs than regular plans, but not zero costs.
• Brokerage, demat and account charges, if you invest through a broker.
• Insurance premiums. Advice on what cover to buy is not the cover itself.
• Tax filing. Advice on tax is not the same as filing your return, which may be a separate service.
• Running your money. A registered adviser recommends; you decide, and usually place the transactions yourself. An adviser may help you carry them out through direct plans, but may not charge a fee for this. Someone who manages money for you is a different service under a different SEBI registration, with its own fees.

Ask for the total of these along with the fee. A low fee with high product costs can cost more than a higher fee with low product costs.

One-time plan or ongoing fee?

Some advisers charge once for a written plan. Others charge every year for a plan plus reviews and support.

SEBI's fee limits apply per year, across all of an adviser's services to your family, so the part of a one-time plan fee that covers advice on SEBI-regulated investments counts towards that year's limit.

A plan is a snapshot. Incomes change, markets move and goals shift, so a plan needs revisiting as your life changes. If you choose a one-time plan, ask what a later review would cost.

What drives the price

Two quotes for "financial planning" can describe very different work. Prices tend to rise with:

• Complexity: business income, property, assets abroad, several goals competing for the same money.
• Scope: investments only, or also insurance, tax, retirement and estate questions.
• Contact: how many meetings, how quickly questions are answered, how often the plan is reviewed.
• Who does the work: a registered adviser in person, or a team or software with an adviser's sign-off.
• Who is covered: one person, a couple, or a household including parents.

How to compare two quotes

Put each quote through the same questions:

1. What is the total I will pay this year, including GST?
2. Does the fee depend on the size of my portfolio? If so, what will it be when my investments double?
3. Does anyone in your group earn anything from the products you recommend, including insurance?
4. What exactly is included: a written plan, meetings, reviews, questions by email?
5. How often is the plan reviewed, and what does renewal cost?
6. How much is paid in advance, and what is refunded if I leave early?
7. Will you recommend direct plans of mutual funds? Registered advisers must, wherever a direct plan is available.
8. What is your SEBI registration number? Check it on SEBI's list of registered investment advisers before you pay.

The cheapest quote is not always the lowest cost, and the most expensive is not always the most thorough. Compare what you get for the total you pay.

What SahajMoney charges

SahajMoney is registered with SEBI as an Investment Adviser (INA100008045) and uses SEBI's fixed fee mode. The fee does not depend on the size of your portfolio, and SahajMoney earns no commission on any product.

Both fees include GST. The fee is per couple, including dependent children and parents. Renewal is voluntary. See what the plan covers for details.

Disclaimer

This article is general information and education. It is not investment advice for your situation, and the example figures are illustrations, not projections or quotes. Rules, fee limits and tax rates are as published at the time of writing and may change.

Registration granted by SEBI, enlistment with IAASB and certification from NISM in no way guarantee performance of the IA or provide any assurance of returns to investors.

Investment in securities market are subject to market risks. Read all the related documents carefully before investing.