Does your adviser tell how much he makes off you?
Rs 33,715 crore was the commission doled out by insurance companies in 2009 and 2010. The primary role of an investment adviser is to suggest the right mix of products to his clients. However, most advisers have been accused of selling the ones that earn a higher commission or fee. Should the advisers disclose their commissions before selling products as a measure of fair play? ET Wealth raises the question with a cross-section of experts.
Srikanth Meenakshi
Founder, fundsindia.com
Founder, fundsindia.com
Yes
The relationship between a financial adviser and a client is based on trust. The client discloses personal information about his financial life and trusts the adviser to provide unbiased advice with nothing but his best interest in mind. For such a relationship to sustain over the long term, it is imperative that the adviser disclose the commission schedule completely to the client, who will inevitably come to know about the payment at some point of time.
If the adviser is proactive about revealing his commission, he can justify it in the context of the advisory services that he is providing. Additionally, the Securities and Exchange Board of India (Sebi) mutual fund regulations make it mandatory for the advisers to share information regarding commissions with their clients.
! Apart from sharing this information, the adviser also needs to educate the client on the method he is using to come up with the recommendations. This will assure the client that the lure of higher commissions does not play a role in the advice provided.
The relationship between a financial adviser and a client is based on trust. The client discloses personal information about his financial life and trusts the adviser to provide unbiased advice with nothing but his best interest in mind. For such a relationship to sustain over the long term, it is imperative that the adviser disclose the commission schedule completely to the client, who will inevitably come to know about the payment at some point of time.
If the adviser is proactive about revealing his commission, he can justify it in the context of the advisory services that he is providing. Additionally, the Securities and Exchange Board of India (Sebi) mutual fund regulations make it mandatory for the advisers to share information regarding commissions with their clients.
! Apart from sharing this information, the adviser also needs to educate the client on the method he is using to come up with the recommendations. This will assure the client that the lure of higher commissions does not play a role in the advice provided.
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