NewsStocksCommission-Based Model Dominates India's Wealth Management Industry Despite Advisory PushCommission-Based Model Dominates India's Wealth Management Industry Despite Advisory Push
India's wealth management sector remains heavily skewed toward commission-based distribution models despite regulatory efforts to promote fee-based advisory services. Nuvama Private Wealth's advisory revenue has stagnated at ₹9.00 crore with its share dropping to 2% of total ARR, while 360 One's distribution revenue grew 41% annually. Higher earning potential from commissions, significant compliance costs, and client preferences for embedded fees continue to drive this structural preference as the industry prepares for substantial growth.
*this image is generated using AI for illustrative purposes only.
India's wealth management industry continues to prioritize commission-based distribution models over fee-based advisory services, despite regulatory frameworks designed to eliminate conflicts of interest. Analysis of the country's top three listed wealth managers reveals a stark preference for distribution revenues, even as the sector prepares for significant growth driven by rising affluence and economic expansion.
Revenue Model Performance Comparison
The financial performance data highlights the dominance of commission-based models across major players:
| Company | Advisory Share of ARR | Distribution Growth | Key Metrics |
|---|---|---|---|
| Nuvama Private Wealth | 2% (Q2, down from 10% in FY21) | Dominant model | Advisory revenue stagnant at ₹9.00 crore |
| 360 One Wealth Management | 36% of wealth ARR assets (Q2FY26) | 41% annual growth (FY21-FY25) | Advisory grew 34% annually |
| Anand Rathi Wealth | Does not offer advisory services | Primary focus | Distribution-only model |
For Nuvama Private Wealth, advisory revenues have remained completely stagnant at ₹9.00 crore between FY21 and FY25, while its contribution to total annual recurring revenue dropped dramatically from 10% in FY21 to just 2% in the second quarter.
Regulatory Framework and Market Reality
The Securities and Exchange Board of India introduced investment advisor regulations in 2013 to formalize fee-based advisory models and address conflicts of interest arising from dual roles as adviser and distributor. Under the advisory model, clients pay fixed fees directly to wealth managers for unbiased advice, theoretically eliminating product-pushing incentives.
However, the distribution model remains dominant, where wealth managers receive commissions from asset managers for selling their schemes. Clients face no direct fees but pay expense ratios on investments, portions of which flow to wealth managers as trail income.
Economic Incentives Drive Model Selection
The preference for distribution models stems from significantly higher earning potential. Industry analysis reveals substantial revenue differences between the two approaches:
| Revenue Model | Commission Structure | Example Earnings (₹100 crore portfolio) |
|---|---|---|
| Distribution | Up to 1% of AUM | ₹1.00 crore |
| Advisory | 20-30 basis points fixed fee | ₹20-30 lakh |
Feroze Azeez, joint chief executive officer at Anand Rathi Wealth, highlighted additional challenges, noting that 15-20% of revenue in advisory models goes toward regulatory compliance costs. The advisory framework requires detailed client financial documentation, risk profiling, asset allocation planning, and mandatory suitability checks—requirements not imposed on distributors.
Compliance and Operational Challenges
Riddhiman Jain, managing director at Waterfield Advisors, explained the operational complexity differences. Advisory services mandate comprehensive understanding of client financial situations, documented risk profiles, investment policy statements, and ongoing suitability verification. While some distributors voluntarily adopt these practices, they remain compulsory only for advisors, significantly increasing compliance costs and client education efforts.
The fee structure also creates client preference challenges. In distribution models, costs remain embedded and largely invisible to clients, while advisory fees require direct out-of-pocket payments through invoicing.
Industry Growth Prospects
Despite model preferences, India's wealth management opportunity shows tremendous potential. Bernstein estimates the country's serviceable wealth will triple from $3 trillion in FY25 to $9 trillion by FY35, driven by rising affluence, strong economic growth, foreign direct investments, and startup ecosystem expansion.
A 360 One spokesperson acknowledged that while advisory currently represents a smaller industry share, global experience suggests adoption accelerates as wealth markets mature, with India now entering that developmental phase where advisory emerges as the preferred model for core portfolios.
Market Structure Implications
Industry experts note that wealth management firms offering both models typically do not proactively inform clients about advisory options unless specifically requested. Azeez observed that even when advisory services are offered, many firms attempt to combine advisory and distribution within the same entity, creating inherent biases when recommending products to advisory clients based on distribution relationships.
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