Introduction

When it comes to hiring a financial advisor, the question of what percentage or fees to pay often arises. There is no fixed percentage or fee structure for financial advisors as the amount charged depends on the services provided and the value of the assets under management. However, there are two primary fee models: fee-based and fee-only. In this article, we will explore these models and offer insights into the typical fees in the Indian market.

Fee-Based Financial Planners

Fee-based financial planners typically work with large assets under management (AUM) and charge a percentage of the total value managed. This fee structure is particularly suitable for wealthy individuals, business houses, or trusts who have a substantial amount of assets. For instance, a financial planner might charge 1-2% of the assets under management. If a client has an AUM of Rs.1 Crore, the fee could be approximately 1% or Rs. 100,000, regardless of the performance of the portfolio.

Fee-Only Financial Planners

Fee-only financial planners charge a fixed fee for the services they provide. These services can range from comprehensive financial planning to specific tasks such as tax planning, risk assessment, and portfolio management. The fee structure for fee-only planners can vary based on the level of experience, professional certifications, and the asset value of the clients. Services can be provided either as a one-time fee or through a monthly subscription. The fee for a one-time service can range from Rs. 25,000 to Rs. 35,000, whereas the monthly subscription fee can start from Rs. 10,000 to Rs. 15,000 with a monthly fee of around Rs. 1,500 to Rs. 2,000.

Other Models

There are a few other models prevalent in the market. Some financial planners offer services for free but earn commissions from the financial products they sell through companies they are affiliated with. This practice is becoming less common as people increasingly opt for professional and certified planners who can guide them from the basics to the implementation of the plan in a profitable manner.

There are also planners who adopt a hybrid model combining fee-only and fee-based approaches. These planners don't charge a flat fee for financial planning but agree to receive a percentage based on the performance of the portfolio.

Choosing the Right Financial Planner

When selecting a financial advisor, it is essential to choose a SEBI registered broker or financial planner. Opting for professionals with relevant experience and certification, such as Certified Financial Planner (CFP), is highly recommended. Reputed financial companies like Edelweiss, ICICI Direct, and Aditya Birla Bajaj Finance provide professional financial planning services to help their clients achieve their financial goals.

Finding the right financial advisor can be a crucial step in achieving your financial objectives. By understanding the different fee structures and choosing the right professional, you can ensure that you are making an informed decision that aligns with your financial needs.