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

Meera has a target sheet. It is printed on Monday morning and it does not care what you need.

She is 29, she has a commerce degree and an NISM certification, and her business card says Relationship Manager. Her branch expects a certain volume of “third-party product” each quarter — insurance, mostly. Her fixed salary is modest. The variable component is not. Nobody at her bank has ever instructed her to mis-sell anything, and nobody needs to. The arithmetic does that on its own.

Almost everything written about commission-driven selling in India is written from the customer’s side of the desk, which is the less interesting side. If you want to predict what you will be sold, look at what the person selling it earns. So let us do the thing nobody does, and rebuild Meera’s month from her chair.

The two sales, priced from the seller’s side

A 34-year-old walks in wanting to “start investing and get some protection”. There are honest ways to serve him and there is a profitable way, and they are not the same.

Recommend the term plan and the index fund, and Meera earns a trail so thin it barely registers on her month. Recommend a bundled insurance-investment policy at a similar annual outlay, and a large slice of that first-year premium becomes her income — front-loaded, in year one, exactly when the quarter is being counted.

Now hold that against the target sheet. Term cover is cheap, so a term sale barely moves her number. The bundled sale moves it a lot. She is not choosing between right and wrong. She is choosing between keeping her job comfortably and keeping it anxiously.

This is what the usual coverage gets wrong. It frames mis-selling as a character problem — greedy agents, gullible customers. It is a design problem. Put a decent person inside that pay structure and the structure wins most of the time. Which also means the fix is not “find an honest one”. It is “understand the structure before you walk in”.

The word doing the damage

There is a legal distinction in India that nobody in the branch will volunteer, and it is the most useful thing you can carry into the conversation.

A SEBI-registered Investment Adviser operates under a fiduciary duty and is barred from earning product commission on the advice they give. A distributor earns commission by selling, and is not authorised to call what they do advice at all. Both sit at a desk. Both may have “advisor” or “wealth manager” on a card. Only one is legally obliged to put you first.

Sit with what that ratio means practically. If someone in a bank branch, a broking app or a family friend’s office gives you a product recommendation, the overwhelming statistical likelihood is that you are not talking to a fiduciary. Not occasionally. Almost always.

The question that ends the ambiguity in nine seconds

You do not need expertise to protect yourself. You need one sentence, delivered without apology:

“Are you a SEBI-registered investment adviser, or a distributor earning commission on what you sell me?”

A genuine RIA answers instantly and gives you a registration number, because displaying it is a regulatory requirement and they are usually pleased to. A distributor will do one of three things, and all three tell you something: state it plainly — fine, now you know how to weight what follows — retreat into job titles, or get defensive.

The follow-up is sharper. “What do you earn if I say yes to this one, versus that one?” You are not accusing anyone of anything. You are asking a factual question about incentives, which is exactly what you would ask a car dealer without a second thought.

Why “just find a fee-only adviser” is not the answer either

Here is where most articles stop, and where this one should not. That advice quietly assumes you can afford one.

A fee-only RIA charges a visible fee — often a meaningful annual sum, or a percentage of assets. On a large portfolio that is trivially worth paying. On a ₹5,000 monthly SIP, an annual advisory fee can exceed a year of expected returns. The economics do not work yet, and pretending otherwise is its own kind of dishonesty.

So the realistic position for most people is messier: you will probably transact through a distributor, and that is survivable, provided you do three things.

Separate the two purchases. Protection and investment solve different problems. Bundled together, the cost of each becomes invisible — which is precisely why they are bundled. Buy term insurance as term insurance. Buy investments as investments.

Treat “free advice” as priced advice. You pay either way. The RIA’s fee is the one that appears on an invoice; the distributor’s is embedded in a higher expense ratio, a premium loading, or a commission never quoted to you. Invisible is not the same as absent.

Ask what happens in year two. Front-loaded commission means the seller’s interest in you peaks the day you sign and falls steeply after. This is the real reason nobody rings to review the SIP they sold you four years ago. If a product pays its seller mostly in year one, expect year-two service to match.

The reason to run it is not to feel angry about the number. It is that once you know the figure, the question changes shape: instead of “is this person trustworthy”, which you cannot verify, it becomes “am I getting that much value in service”, which you can actually judge.

What this does not mean

It does not mean every distributor-sold product is wrong, or that Meera is a villain. Plenty of distributors give sound guidance and sell suitable things, sometimes at real cost to their own numbers. And a bad RIA is still a bad RIA — registration is a floor, not a guarantee.

It means something narrower and more usable: “highest commission” and “best for you” are two different rankings that occasionally coincide. When they diverge, one of them has a target sheet behind it and the other does not. Knowing which conversation you are sitting in is most of the protection.

Meera left that bank eighteen months later and now does fee-only planning for a fraction of the clients at roughly the same income. She says the hardest part was the first six months of telling people the product they had already half-decided on was not right for them. The target sheet had trained her out of that sentence. It took a while to get it back.

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

Not usually — they cost more visibly. A distributor’s compensation is embedded in the product through commission, a higher expense ratio or a premium loading, so you pay either way. What differs is whether the amount appears on an invoice you can compare, or disappears into a product you cannot easily price. Whether it is worth it depends on portfolio size: on a small SIP the fee can outweigh the benefit; on a large portfolio it rarely does.

Can the same person be both a distributor and a registered adviser?

No. SEBI’s framework deliberately separates the two roles to prevent exactly this conflict, so the same individual generally cannot hold both registrations and act in both capacities for the same client. This is why the job title on the card tells you nothing and the registration status tells you everything.

What if I have already bought something commission-driven?

Do not exit reflexively. Surrender charges and exit loads can make a poor product worse to leave than to keep, particularly in the early years of an insurance-linked plan. Work out the cost of exiting against the ongoing drag of staying, treat money already gone as gone, and decide from where you actually stand rather than from where you wish you had started.

Is this specific to banks?

No. The same structure operates through broking apps, independent agents and family contacts. Banks make it most visible because the target sheet is formal and the branch is a familiar, trusted setting — which is exactly the combination that lowers a customer’s guard.

Regulatory source: SEBI publishes the Investment Adviser Regulations and the register where any adviser’s registration number can be verified directly. The reconstruction of the seller’s economics, the target-sheet framing and the character of Meera are this article’s own.

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Disclaimer: General information, not financial advice. Linqz is not a SEBI-registered investment adviser. “Meera” is a composite character, not a real individual. Commission structures, registration counts and regulatory requirements change — verify an adviser’s current SEBI registration status directly before engaging them.