How is a Fee Only Investment Advisor Better?

A fee-only investment advisor is the Investment Advisor who receives a fee from the client for Financial Advisory services. He or she does not receive any commission or brokerage from the companies whose products he or she is advising.

Conflict of Interest

As one can see, there is an obvious conflict of interest if an advisor receives brokerage from the AMC or mutual Fund from promoting its products. That precludes keeping the client’s best interests in mind. The advisor in all likelihood will promote the products with the highest commission. He will promote products as per marketing / selling dictates.

What is wrong with that?

The client deserves to get advise as per his or her financial needs and profile. A fee only advisor will keep only the client’s interest in mind while deciding the portfolio of the client. The advise from the Advisor / Financial Planner will be transparent and objective. It wont be the case for an intermediary who receives commission from a company for promoting its products.

What is an investment advise?

Investment advice “is an advice relating to investing in, purchasing, selling or otherwise dealing in securities or investment products, and advice on investment portfolio containing securities or investment products, whether written, oral or through any other means of communication for the benefit of the client and shall include financial planning. “

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As per the SEBI Investment Advisers Regulations 2013, an investment adviser shall act in a fiduciary capacity towards its clients and disclose all conflicts of interest, will not receive any commission by way of remuneration and compensation OR In any other form from any person other than the client being advised.

So next time you go to an advisor and get charged a fee for advisory services, find out

  • About his or her conflict of interest.
  • About whether or not the Agent gets commission for rhe products he/she is selling