Two advisers can both quote “1 per cent” and mean entirely different things. How wealth managers charge in India depends on who pays them, what the number excludes, and whether anyone else is being paid along the way. A commission built into a fund’s expense ratio, an annual percentage of your portfolio, and a share of your profits are all quoted as percentages, and none of them costs the same thing.
This piece walks through every charging model in common use in India, what the Securities and Exchange Board of India (SEBI) permits at each tier, what a ₹1 crore portfolio actually costs under each, and the charges that sit underneath the headline rate.
Why the Fee Model Matters More Than the Headline Number
The rate on a brochure is an input, not an outcome. What you keep is the return after every cost has been deducted, and those costs arrive from several directions at once.
The structure also decides what your manager is rewarded for. A model that pays on product sales behaves differently from one that pays a flat retainer, even at an identical headline rate. Reading the incentive is part of reading the fee.
The Four Ways Wealth Managers Charge in India
Four models operate in the Indian market. Most providers use two or more of them together.
- Commission or distribution: the manager is paid by the product provider, not by you.
- Fixed or flat fee: a set rupee amount for advice, regardless of portfolio size.
- Percentage of assets: an annual share of the money you have invested or under advice.
- Performance or profit-sharing: a cut of the gains, usually above an agreed threshold.
| Model | Who pays the manager | What SEBI caps | Where you encounter it |
| Commission | The asset management company, from the scheme’s expenses | Scheme expense ratios; commission must be full trail, with no upfront payment | Regular plans of mutual funds |
| Fixed fee | You, directly | ₹1,51,000 per annum per family for individual and HUF clients of a Registered Investment Adviser | Fee-only advisers and financial planners |
| Percentage of assets | You, directly | 2.5 per cent per annum per family under an adviser’s Assets Under Advice mode. No cap on PMS management fees | Advisory relationships, PMS, private banking |
| Performance | You, from realised gains | No cap on the rate. PMS performance fees must use a high water mark | PMS and AIFs |
Commission-Based Charging (Mutual Fund Distributors)
This is the most widely used model in India and the one investors are least likely to notice, because no invoice ever arrives.
A mutual fund distributor is paid a trail commission by the asset management company. That commission sits inside the scheme’s expense ratio and is deducted from the fund’s daily net asset value before any return reaches you. AMFI confirms that asset management companies must follow a full trail model across all schemes, with no upfront commission and no upfronting of trail commission in cash, in kind, or through sponsorships.
The practical consequence is the split between regular plans and direct plans. Both hold the same portfolio and the same manager. As AMFI puts it, a direct plan carries a lower expense ratio because no distributor commission is paid out, and that saving is added back to the returns of the scheme. Every scheme discloses both figures, and AMFI publishes them on its Total Expense Ratio disclosure page, so you can look up the exact gap on any fund you hold rather than working from a rule of thumb.
The conflict here is structural rather than personal. A distributor earns more from some schemes than others, and earns nothing at all on a direct plan, including on a direct plan the investor chose on the distributor’s own advice.
Fee-Only Advice (SEBI Registered Investment Advisers)
This is the regulated, advice-first model. Under Regulation 15A of the Investment Adviser Regulations, a Registered Investment Adviser (RIA) may charge in one of two modes, set out in SEBI’s Master Circular for Investment Advisers:
- Assets Under Advice (AUA) mode: capped at 2.5 per cent per annum per family of client, across all services offered.
- Fixed fee mode: capped at ₹1,51,000 per annum per family of client, across all services offered. This was raised from ₹1,25,000 under the guidelines issued on 8 January 2025.
Three points are commonly misread. The two caps are alternatives, not layers, and an adviser may switch a client between modes, with the applicable ceiling being the higher of the two. The caps apply to individual and Hindu Undivided Family clients, so a family office structured as a corporate entity sits outside them. The fixed fee limit is reviewed every three years by the Investment Adviser Administration and Supervisory Body against the Cost Inflation Index, in consultation with SEBI, and both caps are exclusive of Goods and Services Tax.
Advisers cannot earn product commissions on the assets they advise on, which is what removes the distribution conflict. The segregation operates at client level: an individual RIA cannot also distribute, and a non-individual RIA must run advisory and distribution through separately identifiable divisions. SEBI amended this position in October 2025 to permit AUA-mode fees on assets held under a pre-existing distribution arrangement with another entity where the client seeks a second opinion, subject to annual disclosure and client consent.
Two supporting rules matter in practice. Every engagement requires a written agreement carrying the standardised Most Important Terms and Conditions, which sets out fees, scope and termination in a common format across all advisers. Fees may also be routed through the Centralised Fee Collection Mechanism, so payments run through a regulated and traceable channel rather than a personal bank account.
Percentage-of-Assets Charging (AUM-Based)
Here the manager takes a fixed annual percentage of the portfolio, so the rupee fee rises automatically as the portfolio grows. It appears in PMS management fees, private banking relationships and advisory mandates charged on Assets Under Advice.
The appeal for the provider is revenue that scales with market levels. The tension for the investor is that a portfolio doubling in value does not usually double the work involved, so the rupee cost can climb without a matching change in service. That gap is exactly why larger portfolios can often negotiate a lower percentage: the cost of servicing a ₹10 crore mandate is not ten times the cost of servicing a ₹1 crore one.
Performance and Profit-Sharing Fees
Under this model the manager takes a share of profits, commonly quoted in the range of 10 to 20 per cent. Two contractual protections decide whether that share is fair.
A hurdle rate means the performance fee applies only above an agreed minimum return, rather than on every rupee of gain. A high water mark means you pay only on gains above the portfolio’s previous peak value, so you are not charged twice for recovering ground you have already lost.
Consider a portfolio that peaks at ₹1.2 crore, falls to ₹1 crore, and climbs back to ₹1.3 crore. Without a high water mark, a manager charging 15 per cent could bill on the full ₹30 lakh recovery from the trough, or ₹4.5 lakh. With a high water mark, the fee applies only to the ₹10 lakh gained above the earlier ₹1.2 crore peak, which is ₹1.5 lakh. The clause is worth more than most fee negotiations.
PMS Fee Structures in Detail
Portfolio Management Services is the tier where fee design becomes most intricate, and where reading the Disclosure Document pays for itself. It is worth clarifying that PMS describes a regulated mandate structure, not an asset class. A portfolio manager may run direct equity, and may equally run a portfolio of mutual fund units, and the underlying cost stack differs accordingly. Where a portfolio manager does invest in mutual fund units, the SEBI (Portfolio Managers) Regulations, 2020 permit this only through direct plans, which removes the distributor commission at that layer.
The SEBI circular of 13 February 2020, now consolidated into the Master Circular for Portfolio Managers, sets out the rules that shape every PMS fee sheet:
- No upfront fees may be charged, either directly or indirectly.
- Brokerage is charged at actuals.
- Operating expenses excluding brokerage are capped at 0.50 per cent per annum of the client’s average daily Assets Under Management.
- Exit load is capped at 3 per cent of the amount redeemed in the first year, 2 per cent in the second and 1 per cent in the third. No exit load may be charged after three years from the date of investment.
- Transactions routed through the portfolio manager or its associates are capped at 20 per cent by value per associate for each service.
A client may be charged a fixed fee, a performance-linked fee, or a combination of the two, and performance fees must be computed on a high water mark basis. Every charge must appear in the SEBI-mandated Disclosure Document and the client agreement before onboarding, and 18 per cent GST applies on the fee.
One point deserves emphasis because it is frequently assumed the other way: SEBI caps operating expenses and exit loads, but does not cap the PMS management fee itself. Figures of roughly 1 to 2.5 per cent management fee and 10 to 20 per cent performance fee are market convention, not a regulatory ceiling. The minimum investment per client is ₹50 lakh under Regulation 23(2) of the Portfolio Managers Regulations, 2020, which is what places this tier out of reach for most investors regardless of the fee.
How Alternative Investment Funds Charge
Alternative Investment Funds (AIFs) sit a tier above, with a different structure again: a management fee plus carried interest, which is a share of profits typically payable above a hurdle. Fees are generally higher than PMS and are levied across a multi-year lock-in rather than an open-ended relationship, and the minimum commitment is ₹1 crore. Because the capital is drawn down and returned over a fund life rather than held continuously, the headline rate is not directly comparable with a PMS or mutual fund figure.
The Costs That Sit Beneath the Headline Fee
Most fee conversations stop at the management fee. The all-in cost usually includes several of the following:
- Brokerage and Securities Transaction Tax on every trade, where the portfolio holds direct securities.
- Custodian charges, fund accounting and audit costs.
- Goods and Services Tax at 18 per cent on management fees, performance fees and advisory fees.
- Exit loads on early withdrawal.
- The underlying scheme expense ratio, where the portfolio holds mutual fund units.
All of it is disclosed. Disclosed and obvious are different things, which is why the useful request is a single all-in number rather than a rate card.
What a ₹1 Crore Portfolio Actually Costs
The table below is an illustration using indicative rates, not a quotation. Actual costs vary by provider, scheme and mandate, and the figures below exclude any performance fee. It is included to show how the layers stack.
| Arrangement | Components | Indicative annual cost on ₹1 crore |
| Mutual funds, regular plans | Scheme expense ratio of 1.7 per cent | ₹1.70 lakh |
| Mutual funds, direct plans, self-managed | Scheme expense ratio of 0.8 per cent | ₹80,000 |
| Direct plans plus a fee-only adviser | Expense ratio of 0.8 per cent, plus a fixed fee of ₹1,51,000 and GST | ₹2.58 lakh |
| PMS, fixed fee structure | Management fee of 2 per cent plus GST, operating expenses of 0.5 per cent, brokerage at actuals | ₹2.86 lakh and upwards |
Two things follow. The fixed fee model becomes proportionally cheaper as the portfolio grows, because the rupee amount is capped while the asset base is not. And a heavy fee stack on a smaller portfolio can narrow, or remove, whatever advantage the arrangement was meant to deliver over a low-cost fund.
How the Fee Model Changes Your Net Returns
Gross and net-of-fee returns diverge more sharply than most investors expect, and the gap compounds. The relevant lens is net-of-fee compound annual growth rate across a full market cycle rather than a twelve-month window.
SEBI requires portfolio managers to report performance on a Time-Weighted Rate of Return basis, net of all fees and expenses, and requires firm-level performance to be audited annually. Track records should be compared on that footing rather than against informally calculated numbers.
What Each Model Incentivises
- Commission rewards selling products, and rewards selling the products that pay more.
- Fixed fee rewards giving advice, and is indifferent to how large the portfolio becomes.
- Percentage of assets rewards growing the asset base, which can mean discouraging withdrawals as readily as improving returns.
- Performance rewards beating a threshold, which can encourage additional risk near the end of a measurement period.
None of these is disqualifying. Each aligns with your interests in some situations and pulls against them in others, and knowing which situation you are in is more useful than searching for a model without any conflict at all.
Regular Versus Direct, and Where You Can Negotiate
Two levers sit with the investor.
Choosing direct plans removes the embedded distributor commission entirely. Before switching, note that moving from a regular plan to a direct plan of the same scheme is treated as a redemption and a fresh purchase, so capital gains tax may apply on the switch.
PMS and AIF fees are more negotiable than most investors assume. SEBI sets caps, disclosure norms and structural rules, but does not set a floor, so the management fee, the performance share and the hurdle are all open to discussion, particularly at larger ticket sizes. Knowing the market range before the conversation is what gives you something to negotiate against.
Questions to Ask Before You Sign
- Ask for a fee illustration run on your actual capital, not a generic rate card.
- Ask for the all-in annual cost, including brokerage, custody, audit, scheme expense ratios and GST.
- Confirm the hurdle rate and the exact point at which performance fees begin.
- Confirm in writing that a high water mark clause applies.
- Check the exit terms and any loads before committing.
- Verify the counterparty’s registration. Advisers appear on SEBI’s public list of Registered Investment Advisers under “Intermediaries” on sebi.gov.in, and distributors can be checked through AMFI’s ARN search. [LINK TO BE ADDED: SEBI intermediaries register and AMFI ARN locator]
- Ask whether the person advising you is remunerated by you or by the product provider, and ask for that in writing.
Conclusion
The cheapest arrangement is not automatically the right one, and the most transparent one is not automatically the cheapest. What matters is whether the charges are fully disclosed, whether the structure suits the size and complexity of your portfolio, and whether the incentive it creates points in roughly the same direction as your own.
If you can pick up any fee sheet, work out the all-in rupee cost on your own capital, and name what the manager is being rewarded for, you are equipped to assess any proposal put in front of you.
Frequently Asked Questions
How much do wealth managers charge in India?
It depends entirely on the model. Commission-based advice is embedded in a mutual fund scheme’s expense ratio rather than billed separately. A SEBI Registered Investment Adviser is capped at 2.5 per cent of Assets Under Advice per annum per family, or ₹1,51,000 per annum per family under the fixed fee mode. PMS management fees are not capped by SEBI and commonly run between 1 and 2.5 per cent, often alongside a performance fee of 10 to 20 per cent above a hurdle.
What is the difference between regular and direct mutual fund plans?
Both plans hold an identical portfolio. A regular plan includes the distributor’s trail commission inside its expense ratio, while a direct plan excludes it, which results in a lower expense ratio and a higher net asset value over time for the same underlying scheme. AMFI publishes both figures for every scheme.
What is the maximum fee a SEBI Registered Investment Adviser can charge?
Either 2.5 per cent of Assets Under Advice per annum per family, or ₹1,51,000 per annum per family under the fixed fee mode, across all services offered. The two are alternatives rather than cumulative, the caps apply to individual and Hindu Undivided Family clients, and both are exclusive of GST.
What is a high water mark, and why does it matter?
A high water mark restricts performance fees to gains above the portfolio’s previous peak value, so an investor is not charged a performance fee for recovering a prior loss. SEBI requires PMS performance fees to be charged on this basis.
Can PMS and AIF fees be negotiated?
Frequently, yes. SEBI prescribes caps, disclosure requirements and structural rules, but sets no minimum fee, so the management rate, performance share and hurdle are all open to discussion, particularly at larger ticket sizes.
