What is the difference between an RIA, a distributor and a wealth manager?
A SEBI registered investment adviser (RIA) is paid by you, a mutual fund distributor is paid by the fund house, and a wealth manager can be either, because "wealth manager" is a label, not a registration. Who pays someone decides whose interest they are paid to serve, so it is the first thing to find out.
- RIA. Registered with SEBI under the Investment Advisers Regulations, 2013, with a number starting INA. You pay a fee agreed in writing, and the adviser takes nothing from the products you buy.
- Mutual fund distributor. Registered with AMFI, with an ARN. Paid commission by the fund house, built into the regular plan you buy.
- Wealth manager. A business name, not a SEBI category. Underneath, the firm usually holds one or more registrations: distributor, portfolio manager, stockbroker or RIA. Ask which ones, and for the numbers.
Who pays whom: the money flow behind each
| SEBI registered adviser (RIA) | Mutual fund distributor | Wealth manager | Portfolio manager (PMS) | |
|---|---|---|---|---|
| Registered with | SEBI, number starts INA | AMFI, holds an ARN | No registration of its own: check what it holds underneath | SEBI, number starts INP |
| Who pays them | You | The fund house | Usually product makers, through commissions; sometimes you, through a fee | You |
| How | A fixed fee or a percentage of assets under advice, within SEBI's caps | Trail commission, paid from the regular plan's expense ratio while you stay invested | Commissions on funds, insurance, bonds and structured products, or an advisory or PMS fee | A management fee, often with a share of gains |
| Where you see the cost | Your invoice | The gap between the regular and direct plan expense ratio | Spread across the products you buy, unless it charges a fee | The PMS agreement and statements |
| Earns more if you buy one product over another | No | Can | Can, where paid by commission | Can, through performance fees |
| Can call itself an adviser | Yes | No | Only if it is a registered RIA | It is a manager, not an adviser |
How does a mutual fund distributor get paid?
A distributor is paid trail commission by the fund house, out of the regular plan's expense ratio, for as long as you stay invested. You never see an invoice, but you pay it: every regular plan has a higher expense ratio than the direct plan of the same fund, and the difference comes out of your returns every year.
That is a fair way to pay for help if the help is worth it. The catch is that the cost grows with your money, and commission rates differ between funds and products, so a distributor can earn more from some recommendations than others. See what the regular plan route costs on your own funds with our regular vs direct calculator.
SEBI's rules stop a distributor from calling itself an independent financial adviser, IFA, wealth adviser or anything similar unless it is registered as an investment adviser. If someone uses those words, ask for the INA number.
Can an investment adviser also sell you mutual funds?
No. SEBI keeps advice and distribution apart at the client level, so an adviser cannot sell products to the clients it advises or take commission on what they buy. The rule came in through the 2020 amendments to the Investment Advisers Regulations.
- Individual advisers cannot offer distribution at all. Their family members cannot distribute to the adviser's advisory clients either.
- Companies and firms that do both must split them at group level: a client gets either advice or distribution from the group, never both, and the two businesses must deal at arm's length.
So if a firm offers you advice and then sells you the products it recommended, either it is not acting as your registered adviser for that sale, or something is wrong. Ask which registration covers each part. For what an adviser owes you once you hire them, read our guide to fiduciary duty.
How do I know which one I am dealing with?
Ask for the registration number and check it: INA means investment adviser, INP portfolio manager, and an ARN means mutual fund distributor. Our post on how to verify a SEBI registered advisor shows the search on SEBI's site.
Then look at your own holdings. If your mutual funds say "Regular" in the plan name, someone is being paid commission on them. A free Portfolio X-ray shows which of your funds are regular plans and what they cost you.
Where we fit, and where we do not
Invsify is a SEBI registered investment adviser (INA000020572). You pay us ₹8,999 a year, fixed, and that is all we earn from you: no commissions, and we recommend direct plans. We do not handle your money. You invest in your own name.
We are not the only sensible route. If you want someone to handle the buying and paperwork and you are comfortable paying through the regular plan, a good distributor does that. If you want a manager to run a large portfolio day to day, a portfolio manager is built for it. And if you are confident choosing and reviewing funds yourself, a direct plan platform costs less than any of us.