How to Choose a Financial Advisor

Ask one question before anything else: who pays you? A SEBI-registered investment adviser is paid by you, and the fee is capped by regulation. A distributor is paid by the product maker, out of your money, and there is no cap you can see. Both can be competent. Only one has a duty that survives a bad product with a good commission.

What is the difference between an RIA and a distributor?

Rule or limit	Figure	Applies to	Source
Fee cap, assets-under-advice mode	2.5% of AUA a year, per family	SEBI-registered investment advisers	SEBI Board memorandum, October 2024
Fee cap, fixed-fee mode	₹1,51,000 a year, per family	Same, revised up from ₹1,25,000	Same
Fee cap on non-individual clients	Does not apply	Company and trust clients	Same
Advice and distribution to the same family	Not allowed	Segregation at family or group level	Same
Minimum qualification for an adviser	Graduate degree	Relaxed from post-graduation	Same
Experience required	None	Individual advisers and principal officers	Same

The caps are per family, not per person. They cover all services the adviser offers you. So an adviser cannot bill you 2.5% for one mandate and add another fee for a second. Fees must be charged under one of the two modes, and the total cannot exceed the higher of the two limits.

One caveat on the ₹1,51,000. That figure comes from the SEBI Board memorandum of October 2024, which revised the earlier ₹1,25,000 limit using cost inflation indices. The limit is meant to be indexed periodically, so confirm the current number in your adviser’s agreement rather than assuming this one still stands.

Why the segregation rule matters more than the fee cap

SEBI requires client-level segregation of advisory and distribution services, at family or group level. In plain terms: the same firm cannot advise you and earn commission from selling you products. It must pick one, for your whole family.

That rule exists because the conflict is not theoretical. A commission-paid seller earns nothing when the right advice is “hold cash”, “buy a term plan, not a ULIP”, or “stop the SIP for six months”. A fee-paid adviser earns the same either way. That is the entire argument, and it does not need a study to support it.

How do you check whether an adviser is actually registered?

Look them up. SEBI publishes the list of registered investment advisers on sebi.gov.in, with registration numbers. A genuine RIA quotes that number without being asked, in the engagement letter and on the website. Mutual fund distributors hold an AMFI registration number instead, which is a different thing and is not a licence to advise.

Three claims should end the meeting. That they are “SEBI approved” rather than registered. That the advice is free. And that they cannot show you a signed advisory agreement setting out the fee. Free advice is the most expensive kind, because you pay for it inside a product you never priced.

What the 2024 relaxations changed, and why you should care

SEBI lowered the entry bar. The minimum qualification was cut from a post-graduate or professional qualification to a graduate degree. The experience requirement for individual advisers was removed entirely. Base certification is NISM-Series-XA and XB, required at registration.

The intent was to bring more advisers into a badly under-served market, and that is a fair goal. The consequence is that registration alone now tells you less about competence than it did. Registration tells you who pays the adviser. It does not tell you that they are any good. You still have to ask about experience, because the regulator no longer does.

Which fee model should you pick?

It depends on the size of your portfolio, and the arithmetic is not subtle.

Take the assets-under-advice mode at its 2.5% ceiling. On a ₹40,00,000 portfolio that is ₹1,00,000 a year. On a ₹2,00,00,000 portfolio the same percentage would be ₹5,00,000, but the rupee cap bites: no more than ₹1,51,000 a year per family. So the percentage model is worse for a large portfolio and the flat fee is worse for a small one. Work out both numbers before you sign.

Also ask what the fee is for. A financial plan is a one-off piece of work. Ongoing portfolio management is not. Paying an annual percentage for what is effectively a rebalancing email twice a year is poor value at any cap. Ask what happens in year three, when the plan is written and the portfolio is running.

What should you ask in the first meeting?

Your SEBI registration number, and the date you were registered.
Do you or your firm earn any commission from any product, from anyone in my family?
Which fee mode are you proposing, and what is the rupee amount in year one and year three?
Show me a redacted plan you have written for a client like me.
What will you tell me to sell, not just to buy?

The fifth question is the one that separates advisers. Selling advice is unpaid, unpopular and where most of the value sits. An adviser who has never told a client to surrender an endowment policy or exit a badly chosen fund has probably not been advising.

Do you even need an adviser?

Often, no. If your finances are an emergency fund, a term plan, an index fund and an EPF account, you do not need to pay anyone a percentage to maintain that. The SIP calculator and an hour a year will do it. Our page on mutual fund taxation covers most of what an adviser would tell you about tax on those holdings.

Advice earns its fee at the complicated moments. A business sale. An inheritance split between siblings. An NRI returning to India. A concentrated stock position from an employer. Retirement drawdown, where sequencing risk is real and irreversible. Pay for those. Do not pay a recurring percentage for a portfolio a spreadsheet can run.

Frequently asked questions

How much does a financial advisor cost in India?

A SEBI-registered adviser may charge up to 2.5% of assets under advice a year, or a fixed fee of up to ₹1,51,000 a year. Both caps are per family and cover all services. Those are ceilings, not going rates. Many advisers charge well below them, and a one-off plan is usually cheaper than either.

Is a mutual fund distributor the same as a financial advisor?

No. A distributor is registered with AMFI and paid a trail commission by the fund house, embedded in the regular plan’s expense ratio. An investment adviser is registered with SEBI and paid by you. SEBI requires the two roles to be segregated at family level, so one firm cannot do both for you.

How do I verify a SEBI registered investment adviser?

Ask for the registration number and check it against SEBI’s published list of intermediaries on sebi.gov.in. Verify the name and the address match. “SEBI approved” is not a category and nobody registered uses that phrase.

Is free advice from my bank relationship manager reliable?

Treat it as a sales conversation, because that is what it is. Bank relationship managers work to product targets and are compensated on what they sell. That does not make every recommendation wrong. It does mean the recommendation you get depends partly on the quarter the bank is having.

Should I pay a percentage of my portfolio every year?

Only if the work continues every year. A percentage fee grows as your portfolio grows, while the work usually does not. On a large portfolio the rupee cap protects you. On a mid-sized one, a fixed annual fee or a paid-for review is often the better structure.

Sources

SEBI Board memorandum, Review of the regulatory framework for Investment Advisers and Research Analysts, October 2024 — fee modes and caps, segregation of advisory and distribution, qualification and experience requirements. sebi.gov.in. Read 7 September 2026.
SEBI circular SEBI/HO/MIRSD/MIRSD-PoD1/P/CIR/2025/003, Guidelines for Investment Advisers, dated 8 January 2025. sebi.gov.in.