Your “Financial Advisor” Is Probably Just a Salesperson on Commission

The person across the desk calling themselves your “financial advisor” is, in the overwhelming majority of cases in India, legally a salesperson earning commission on whatever they sell you — not a fiduciary bound to recommend what’s actually best for you. The distinction isn’t a technicality. It’s the entire reason the product you were sold might not be the product you needed.

The number that explains almost everything

As of August 2025, India has just 967 SEBI-registered investment advisers (RIAs) serving a market of over 20 crore investors — against more than 1,33,000 mutual fund distributors. The regulatory design is deliberate and worth understanding: an RIA is legally prohibited from earning product commissions while giving advice and operates under a fiduciary duty to the client, while a distributor earns commission precisely by selling and is explicitly not authorised to call what they do “advice” at all under SEBI’s framework — even though almost everyone experiences the interaction as advice.

Why this shapes what gets recommended to you

A commission-based distributor earns meaningfully more selling a ULIP or traditional endowment insurance policy (often 20-40% of first-year premium) than selling a term plan plus a separate mutual fund SIP — even when the term-plus-SIP combination is, for the overwhelming majority of buyers, the better outcome on both protection and returns. The distributor isn’t necessarily acting in bad faith; they’re responding rationally to the incentive structure they operate under. But the customer sitting across the table, using the word “advisor” in their head, has no way to see that structure unless they specifically ask.

The one question that reveals which one you’re talking to

Ask directly: “Are you a SEBI-registered investment adviser, or a distributor earning commission on what you sell me?” A genuine RIA will confirm their registration number without hesitation, since disclosing it is a regulatory requirement. A distributor calling themselves an “advisor,” “wealth manager,” or “relationship manager” is very often still commission-compensated — the job title tells you nothing; only the registration status does.

What this means for how you should treat any recommendation

This doesn’t mean every distributor-sold product is wrong for you, or that every RIA is automatically better — fee-only advice has its own cost, and a good, honest distributor genuinely does exist. It means you should ask what the recommender earns from a specific recommendation before acting on it, and treat “highest commission” and “best for you” as two different, sometimes opposed, things that happen to occasionally overlap.

Do fee-only RIAs actually cost more than a “free” distributor?

An RIA charges an explicit, visible fee. A distributor’s compensation is embedded invisibly in the product’s cost structure (commission, higher expense ratio, or premium loading) — you’re paying either way; the RIA fee is simply the one you can actually see and compare.

Can a distributor also be a registered investment adviser?

No — SEBI’s framework requires the two roles to be kept separate specifically to avoid this exact conflict of interest. The same individual generally cannot hold both registrations simultaneously and act in both capacities for the same client.

Source: 1Finance: “SEBI RIA vs Mutual Fund Distributors (MFDs)”.

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Disclaimer: This article is for general information only and is not financial advice. Registration counts and regulatory requirements may change — verify an individual adviser’s current SEBI registration status before engaging them.