Seeking affordable financial advice? Try fixed-fee RIAs

Sebi-registered RIAs earn from client fees, not commissions, ensuring conflict-free guidance

- Maulik M.

In a world where ‘free’ advice is readily available from multiple sources, the idea of paying for financial advice is hard to accept.

But investing based on tips from WhatsApp groups and recommendations from incentive-driven bank relationship managers and insurance agents is more likely than not to lead you to the wrong financial products.

Those willing to pay for conflict-free financial advice can turn to Sebi-registered investment advisers (RIAs). The Sebi website provides the list of RIAs registered with it.

Well-regulated by Sebi and mandated to earn income only via fees from clients, and not other sources such as product-based commissions, RIAs can be your way to sound financial advice. But how much should you be willing to pay for such advice, and what can you expect in return?

While this can vary from one RIA to another, it is also a function of the fee model—fixed fee or as a percentage of the assets on which you seek advice (AUA)—that a RIA follows. Broadly speaking, the fixed fee model can offer you a more affordable route to financial planning.

Who are RIAs?

RIAs are individuals or corporate entities that have been authorized by Sebi to offer financial planning and investment advice to clients for a fee. They cannot earn any income in any form (such as commissions) from any person other than the client for the products being recommended. The concept of RIAs emerged for the first time in 2013, following the introduction of Sebi's investment adviser regulations, which have since undergone numerous changes.

According to Sebi data as of 31 March, there are 660 entities registered as RIAs with the regulator. As Avinash Luthria, Sebi RIA at Fiduciaries, points out, once you exclude the RIAs reporting nil fee and those offering only equity/derivatives, the RIA numbers are 376. Of this, he believes 10-15% to be fixed-fee only advisors.

Fixed-fee or percentage-fee