Among India’s three top listed wealth managers, Nuvama Private Wealth hardly earns much out of advising clients, while Anand Rathi Wealth does not offer this service. For the third, 360 One Wealth Management, commissions continue to grow at a much faster pace.
In 2013, the Securities and Exchange Board of India (Sebi) rolled out investment advisor regulations, formalizing a model where clients pay a fixed fee to a wealth manager for advice. According to Sebi, the objective of the framework, among other things, was to address the conflict of interest arising from the dual role played by the entity as adviser and distributor of financial products.
India’s wealth management opportunity is expected to surge on rising affluence, strong economic growth, higher foreign direct investments, and the growth of the startup ecosystem. Bernstein estimates that the country’s serviceable wealth is expected to triple from $3 trillion in FY25 to $9 trillion by FY35.
Under the dominant distribution model, the wealth manager gets a commission from the product creator or an asset manager for selling its scheme or a fund, potentially leading to conflict of interest. Clients do not pay fees, and are charged an expense ratio on the overall investment, a part of which goes to the wealth manager.
However, when there is no monetary benefit to prefer a particular scheme, the adviser is expected to suggest a product best-suited for an investor, rather than the one that fetches a higher commission. But advisors usually do not cater to investors with smaller investable corpuses, which a distributor may do, experts say.
For Nuvama Private Wealth, advisory made up only 2% of the total annual recurring revenue (ARR) in the second quarter ended September, down from 10% in FY21, according to disclosures by the company. ARR is the recurring revenues earned through a mix of commissions and fixed advisory fees.
The advisory revenues have remained stagnant at ₹9 crore between FY21 and FY25 for Nuvama Private Wealth.
Advisory contributed 36% of the total wealth ARR assets in Q2FY26 for 360 One Wealth Management compared with 37% in FY21. Wealth ARR assets generate revenues through trail income or commissions earned every year with the growing AUM.
The firm’s advisory revenue grew at an annualized rate of 34% between FY21 and FY25 compared with a 41% rise in the distribution revenue.
Queries emailed to Nuvama Wealth Management remained unanswered.
A 360 One spokesperson said that while advisory currently accounts for a smaller share of industry assets, global experience shows adoption accelerates as wealth markets mature and India is now entering that phase, with advisory emerging as the preferred model for core portfolios.
Compliance costs
Feroze Azeez, joint chief executive officer at Anand Rathi Wealth, which does not offer advisory services, flagged another hurdle: around 15-20% of revenue spent in an advisory model goes on regulatory compliance.
Unlike distribution, advisory requires a detailed understanding of a client’s financial situation, documentation of risk profiles and asset allocation, creation of an investment policy statement, and mandatory suitability checks to ensure every recommendation aligns with the client’s goals and risk appetite, according to Riddhiman Jain, managing director, head of investment strategy and solutions at Waterfield Advisors, a wealth management company which runs purely an advisory model.
Some distributors may voluntarily follow these processes, but they are not required to, Jain said. However, he said, they are compulsory for advisors, raising compliance costs and the effort needed to educate clients.
In distribution, there is no out-of-pocket cost for clients because manufacturers pay distributors, with commissions embedded and largely invisible.
“In advisory, fees are entirely out of pocket—the advisor raises an invoice, and the client pays directly, unlike in a distributor set-up where the client doesn’t pay out of pocket,” said Jain.
Commissions pay better
Moreover, a wealth manager earns more from commissions than from a fixed advisory fee, explaining their preference for this model.
“Wealth outfits which offer both options do not usually tell their clients about the advisory model unless the clients ask about it themselves,” said a wealth manager, who didn’t want to be identified.
Take the example of a relationship manager who has a client with a ₹100 crore portfolio. With distributor commissions going up to 1% of the assets under management (AUM), in comparison to a fixed advisory fee of around 20-30 basis points, the choice is quite clear. The manager stands to earn ₹1 crore under the distribution model compared with ₹20-30 lakh as pure advisory fees.
Azeez of Anand Rathi Wealth said that even advisory services in India are often not practised in their true spirit, largely because many wealth management firms attempt to combine advisory and distribution within the same entity. Sebi has introduced multiple modifications and refinements to its guidelines over the years because the industry has been reluctant to follow the framework in both letter and spirit, he said.
When a wealth management company earns commissions by distributing a particular asset manager’s product, said Azeez, there is a natural tendency to recommend the same product to advisory clients as well, thereby creating an inherent bias.
