What is fiduciary duty in investment advisory?
Fiduciary duty is a legal obligation to act in your best interest and to put it ahead of the advisor's own. An advisor who owes it has to recommend what suits you, not what pays them more.
In India the duty is written into SEBI's Investment Advisers Regulations, 2013. Every SEBI registered investment adviser must act in a fiduciary capacity towards its clients and disclose conflicts of interest as and when they arise.
That duty belongs to registered investment advisers. A mutual fund distributor, an insurance agent or a stockbroker is not bound by it under those rules, even when they call what they give you advice.
What the duty requires in practice
- A written agreement before any advice, setting out the fee, the services and how either side can end it.
- Risk profiling and suitability. The adviser must assess your risk profile and only recommend what suits it.
- Disclosure of conflicts, in writing, whenever one arises.
- No commissions from the clients it advises. SEBI separates advice from distribution, so an adviser cannot sell products to its own advisory clients.
- Fees within SEBI's limits, paid only through banking channels.
- Confidentiality of what you share, and records of advice given.
- A grievance route: the adviser first, then SEBI's SCORES and the supervising body. The full list of your rights is in our Investor Charter.
Who owes you the duty, and who does not
| SEBI registered investment adviser | Mutual fund distributor | Research analyst or broker advisory | Portfolio manager (PMS) | Do it yourself on a direct platform | |
|---|---|---|---|---|---|
| Rules they follow | SEBI Investment Advisers Regulations, 2013 | AMFI registration and code of conduct | SEBI Research Analysts Regulations, 2014, and broker rules | SEBI Portfolio Managers Regulations, 2020 | None: you decide |
| Fiduciary duty under the adviser rules | Yes | No | No | Separate duties under the PMS rules | Not applicable |
| Who pays them | You, a fee agreed in writing | The fund house, through the regular plan's higher costs | You, a research fee, or brokerage on your trades | You, a management fee and often a share of gains | No one: you pay only the fund's costs |
| Earns more from some products | No | Can | Can, where trades earn brokerage | Can, through performance fees | Not applicable |
| Handles your money | No: you invest in your own name | No: you invest with the fund house | No, though a broker holds your trading account | Yes, with authority to trade | No |
| Usually suits | Someone who wants a plan across everything they own | Someone who wants help buying funds and accepts paying through the plan | Someone who wants stock ideas and picks for themselves | A large portfolio, from ₹50 lakh, handed to a manager | Someone confident choosing and reviewing on their own |
What questions to ask an investment advisor before hiring
Ask how they are registered, how they are paid, and whether anyone other than you pays them. Those three answers tell you whether the advice can be independent. The rest of the list checks how the advice will be given.
- What is your SEBI registration number? Check it yourself on SEBI's list of registered investment advisers. An adviser's number starts with INA. Check the name and validity match.
- How exactly are you paid? A fixed fee, or a percentage of the assets you advise on. Get the amount in writing.
- Does anyone else pay you when I act on your advice? The only right answer from an adviser is no.
- Do you, or any company in your group, sell the products you might recommend? If yes, ask how that is kept apart from your advice.
- Will you recommend direct plans of mutual funds? Direct plans carry no distributor commission. See what the difference costs with our regular vs direct calculator.
- How will you assess my risk profile, and will I see it? You are entitled to see the profile your advice is based on.
- What does the agreement cover? The services, the fee, how often you will review the plan, and how and when either of us can end it.
- Who will actually advise me? Their name, qualifications and certification, and how you can reach them.
- Do you use automated tools in your advice, and to what extent? SEBI requires advisers to disclose this.
- If something goes wrong, how do I complain? You should get a named contact and a timeline, and the adviser should publish its complaints data.
Be wary of anyone who promises a return, asks for the login to your trading, demat or bank account, or asks you to transfer money to them to invest. A SEBI registered adviser does none of these.
How to assess whether your advisor has a conflict of interest
Follow the money: if any of your advisor's income depends on which product you buy, there is a conflict of interest. It does not mean the advice is wrong, but it does mean you need to check it.
Where conflicts usually come from
- Commissions. Trail commission on regular plans, upfront commission on insurance, and incentives from product makers.
- Brokerage. Income that rises with how often you trade.
- Group products. An advisor whose group runs funds, insurance or a PMS of its own.
- Performance fees, which can reward taking more risk than you would choose.
- Their own holdings in the shares or funds they recommend to you.
Signs to look for in the advice itself
- Regular plans recommended when a direct plan of the same fund exists.
- Insurance policies sold as investments, especially ones with long lock-ins and high early charges.
- Advice that asks you to switch or trade often without a clear reason tied to your goals.
- New products pushed at the end of a quarter or financial year.
- Fees, disclosures or the risk profile that are never put in writing.
What to do if you find one
Ask for the conflict to be disclosed in writing, with what the advisor earns from the recommendation. Compare the recommended product with a low-cost alternative, such as the direct plan or an index fund. If the advisor is SEBI registered and does not resolve a complaint, take it to SEBI SCORES.
Where we fit, and where we do not
Invsify is a SEBI registered investment adviser (INA000020572). We are fee-only: our fee is ₹8,999 a year, fixed, and we take no commissions. We do not handle your money. You invest in your own name and our advisory team reviews the plan with you.
We are not the right choice for everyone. If you want stock tips, a research analyst is built for that and we do not give them. If you want someone to run a large portfolio for you day to day, that is a portfolio manager's job. If you are confident choosing and reviewing funds yourself, a direct plan platform with no advice costs less than any advisor.
We publish our complaints data every month, and our Investor Charter sets out what you are entitled to from any registered adviser, including us.