Fee-Only India

Fee-only planners charge a pre-determined fee for their services, which is the only source of income for the advisor. This fee is paid directly by the client, and the advisor does not earn additional income through commissions from the products the client invests in.

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There are two main models for calculating these fees:

• Flat Fee-only planners charge a pre-determined flat fee, regardless of the client's asset or investment size. The fee is based on the time and effort the advisor needs to invest to help the client in their financial planning.

• AUA-based fee planners charge a fee that is calculated as a percentage of total Assets Under Advice (AUA).

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Distributors earn income from commissions from financial products they recommend.

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All FOI advisors listed on this website are Flat Fee-only planners who charge a flat fee, and not based on the AUA.

 

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Conflict of Interest:

Distributors may have an inherent incentive to recommend products that generate higher commissions, potentially introducing a bias in the advice they offer. For instance, they might suggest that clients move more funds into investments such as mutual funds that yield higher commissions, even when other investment options would better serve the client's best interests.

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AUA-based fee planners, who charge fees based on assets under management, may also experience a similar bias. While they do not earn commissions from these products, they may be incentivized to allocate funds into assets that contribute to their AUA calculations, rather than considering investments like real estate or government programs which may be in the client’s best interest, but fall outside the scope of AUA-based fee structure

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Flat fee-only planners are less likely to experience this bias, as their revenue is not tied to AUA or commissions from recommended products. This allows them to provide advice that is truly centered on the client's best interests, focusing solely on what is right for the client without any external incentives.

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Predictability and lower costs:

When an advisor's earnings are based on AUA or commissions, the cost to the client increases over time as the portfolio grows, both from additional investments and the natural appreciation of the portfolio.

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In a flat fee-only scenario, the fee remains consistent as specified by the advisor upfront, allowing clients to know exactly what they will pay in advance. This predictable, lower cost can have a significant positive impact on investors over the long term.

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Dependency on the advisor:

In most cases, distributors and AUA-based planners manage investments on behalf of the client and execute transactions for them. As the advisor handles the investments, clients may become dependent on the advisor, making it difficult to end the engagement or transition to managing their funds independently.

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In Flat Fee-only planning, the client retains full control over their investments, executing transactions independently without relying on the advisor. This fosters greater independence, allowing the client the freedom to follow or adjust recommendations based on the unbiased guidance provided by the flat fee-only planner.

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