Questions to ask a financial advisor before you hire one
Ask any financial advisor first whether they are registered with SEBI or AMFI. Then ask how they are paid and how they will judge the risk you can take. SEBI registers investment advisers and AMFI registers mutual fund distributors, and you can search both registers online before you pay anyone.
In this guide
Key takeaways
- Anyone who charges for advice on shares, mutual funds or other securities must be registered with SEBI as an investment adviser.
- Check SEBI's Recognised Intermediaries list for an adviser, and AMFI's distributor search by name or ARN, before you pay anyone.
- For individual clients, SEBI caps an adviser's fee at 2.5% a year of the money advised on, or ₹1,51,000 a year per family.
- A mutual fund distributor is paid by the fund house out of the scheme's expenses, so you get no separate bill.
- Pay an adviser's fee by cheque, bank transfer or UPI, never in cash, and never hand an adviser money to invest.
What should you ask a financial advisor before you hire one?
Ask four things first: are you registered and can I check it, how are you paid, how will you judge the risk I can take, and where will my money go.
"Financial advisor" is an everyday title. The legal one in India is "investment adviser", the term used by SEBI, the Securities and Exchange Board of India, in its rules for people who advise on shares, mutual funds and other securities. Registered advisers must use that term with clients.
In the order to ask them:
- Are you registered, and what is your registration number?
- Who pays you, how much, and how do I pay?
- How will you judge my risk, and what will we sign first?
- Where will my money go, and will you ever hold it?
Who is allowed to give investment advice in India?
Anyone who charges you for advice on shares, mutual funds or other securities must be registered with SEBI as an investment adviser. SEBI's regulations define an investment adviser as anyone who, for a fee, is in the business of giving investment advice, "by whatever name called".
Some people are exempt, on conditions. An insurance agent registered with IRDAI, the insurance regulator, may advise solely on insurance products. A mutual fund distributor may give advice that is incidental to its main activity. So may advocates, where the advice is incidental to their legal practice, and chartered accountants, where it is incidental to their professional service.
A mutual fund distributor is a person or firm registered with AMFI (the Association of Mutual Funds in India). It holds an AMFI registration number (ARN) and a NISM certificate, and helps you buy and manage mutual funds. A bank that sells funds acts as the fund house's agent. See how to invest in mutual funds online and offline.
SEBI's definition counts financial planning as investment advice. See financial planning for beginners.
The two roles side by side:
| Registered investment adviser | Mutual fund distributor | |
|---|---|---|
| Registered with | SEBI; numbers begin "INA" | AMFI; carries an ARN |
| Qualification | Graduate degree or CFA charter plus a NISM certification, or a NISM postgraduate programme | A NISM certification; a fund house may not deal with an intermediary that has not cleared the certification exam |
| Main job | Advice, including financial planning | Helping you buy and manage funds; advice only incidental |
| Who pays | You alone; SEBI caps the fee for individual clients | The fund house, out of the scheme's expenses |
| Can also sell you products? | No: an individual adviser may not distribute, and a firm keeps each client on one side | Yes, that is the job |
| Duty | Fiduciary: must put your interest first | AMFI's Code: the investor's interest is paramount |
A distributor may not call itself an "independent financial adviser", an "IFA" or a "wealth adviser" unless it is also registered with SEBI as an investment adviser.
How do you check that an advisor is registered?
Look them up on SEBI's website under "Recognised Intermediaries", then "Investment Adviser", or "Research Analyst" if what you are being offered is stock tips. SEBI's own Investor Charter for advisers says to deal only with registered ones and to check the registration number against SEBI's list.
Each entry gives the adviser's name, registration number, contact details and validity. The details should match what the adviser prints on its website and on your agreement. SEBI's rules require the adviser to display these details prominently.
For a mutual fund distributor, search the Locate a Mutual Fund Distributor page on AMFI's website by name or ARN. It also links AMFI's list of suspended and terminated ARNs.
Titles such as CFP and ChFC are not SEBI requirements. SEBI's standard terms for advisers say that registration does not promise the adviser's performance or returns.
How is a financial advisor paid, and why does it matter?
A registered investment adviser is paid only by you. A mutual fund distributor is paid by the fund house, out of the scheme's expenses. Who pays shapes what someone is paid to do.
How a registered adviser is paid
SEBI lets an adviser charge in two ways. In the assets-under-advice mode, the fee is capped at 2.5% a year of the money advised on, per family of client, across all services. In the fixed-fee mode, it may not exceed ₹1,51,000 a year per family. A family includes you, a dependent spouse, dependent children and dependent parents.
These limits cover individual and Hindu Undivided Family clients who are not accredited investors, and only advice on securities within SEBI's purview. They do not include statutory charges.
An adviser may take fees in advance only if you agree, and for no more than a year. If you end the arrangement early, you are refunded the unexpired period, though the adviser may keep a breakage fee of at most one-quarter of the fee.
Pay by cheque, demand draft or direct credit to the adviser's bank account through NEFT, RTGS, IMPS or UPI. Advisers may not accept cash. An adviser may not receive payment from anyone other than you for the products or securities it advises on.
How a distributor is paid
A distributor is paid by the fund house. The money comes out of the scheme's expenses, which include marketing and selling expenses, including fees and charges for distributing the scheme. You buy through a distributor in the version of a fund called a regular plan.
You never get a bill for this. The fund's expense ratio is its yearly fee, shown as a percentage of your money. It is taken from the fund's assets each day, before the NAV (the price of one unit) is worked out. So the NAV you see is already after the expense ratio. See what the expense ratio is and why it matters and how mutual fund companies make money.
Until 8 August 2025, a fund house could also pay a distributor a transaction charge on investments of ₹10,000 or more. SEBI ended it that day, with immediate effect, so an investor pays none on a purchase or a SIP today.
A worked comparison
Take Meera, who has ₹5,00,000. Say it sits in a regular plan with a total expense ratio of 1.2%, an assumed figure for illustration, not a forecast. Over a full year, about ₹6,000 of fund costs come out inside the NAV (₹5,00,000 × 1.2%, ignoring growth). That covers all the scheme's running costs, distribution included, with no split shown between them.
An adviser's fee on the same ₹5,00,000 advised can be at most ₹12,500 a year: 2.5%, for an individual client in the assets-under-advice mode, before statutory charges.
The two sums are worked out differently. They show how each is paid, not which costs less.
What should a good advisor ask and agree with you first?
A registered adviser must learn your age, goals and time horizon, income, existing investments, borrowings and comfort with risk. From this the adviser builds a risk profile, a picture of the risk you are willing and able to take. The profile is shared with you and updated periodically, and any advice must suit it. See what risk tolerance is.
Before any advice or fee, you must sign an advisory agreement that includes SEBI's list of most important terms and conditions. SEBI's rules say no advice is rendered and no fee is charged until you have signed. The adviser cannot place any trade for you without your specific, positive consent on every trade.
The law also sets the adviser's duty. A registered adviser must act in a fiduciary capacity towards you, which means putting your interest first, and must disclose conflicts of interest as they arise. SEBI's code of conduct asks for fees that are fair and reasonable.
Keeping advice apart from selling is part of that. An individual adviser may not distribute at all, and a firm must keep each client on one side, advice or distribution.
Distributors have a duty too, in AMFI's Code of Conduct. It asks them to treat the investor's interest as paramount and not to let a financial incentive decide which scheme they recommend. A distributor should say clearly that it is acting as one, and should not give the impression of performing a role it is not registered for. Large distributors in an "execution only" deal must warn you in writing if a product is not appropriate.
Which answers should make you walk away?
Walk away if someone cannot show a registration, promises assured or fixed returns on an investment, or asks you to send money anywhere other than the fund.
- No registration, or one that does not match. If the name or number is not on the register, stop there.
- Promises of assured or fixed returns. The standard terms SEBI sets for every registered adviser's agreement say that "assured or fixed returns schemes", and schemes like them, are prohibited by law.
- A request to pay money into a personal account. An adviser is not permitted to accept funds or securities on your behalf. For funds, money must go directly from your account into the scheme account with no intermediate pooling. SEBI's Investor Charter says to issue payments in the name of the mutual fund or scheme only.
- A payee UPI ID that does not end in "@valid" plus a bank's name. SEBI made this structured address mandatory for intermediaries such as brokers, research analysts, investment advisers and mutual funds from 1 October 2025. Distributors are not on that list, so pay only the fund. SEBI Check lets you verify the bank account and UPI ID of a SEBI-registered intermediary.
- A product outside SEBI with no warning. A registered adviser must say so. Digital gold is one product people ask about; see whether digital gold is safe.
- Tips from an influencer. Since 29 August 2024, SEBI-regulated firms may not associate with unregistered people who advise on securities or claim returns. Read how to protect yourself from bad financial advice on the internet.
If something has already gone wrong with an adviser, complain to the adviser first, who must resolve it within 21 days. After that you can use SCORES, SEBI's complaint portal, and then SMART ODR, the online dispute-resolution route that follows it. For a fund matter, the route starts with the fund house's Investor Relations Officer. Our pages on mis-selling and financial fraud cover what to do next.