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NISM-Series-X-A: Investment Adviser (Level 1) · Operational Aspects of Investment Management

Investment Adviser Fees, Disclosures and Grievance Handling

Updated 11 October 2026 · Fact-checked

An investment adviser can charge a fee based on assets under advice (capped at 2.5% a year per client) or a fixed fee (capped at ₹1,51,000 per client (family) a year, as revised by SEBI), but not both. The adviser must disclose conflicts of interest. Complaints go first to the adviser, then SCORES, then ODR if unresolved.

Understand Fees, Disclosures and Grievance Handling

A SEBI-registered investment adviser earns only from the client for the advice given. The client pays the fee. The adviser should not take payment from product issuers for the same advice. This is why fees, disclosures and complaint handling are tightly regulated.

There are two fee models. In the assets under advice (AUA) model, the fee is a percentage of the value of assets on which advice is given. In the fixed fee model, the client pays an agreed flat amount. The adviser chooses one model for a client. Charging both to the same client is not allowed. Fees may be charged only under the AUA or fixed fee model, so a success or performance-linked fee is not permitted.

SEBI sets ceilings so that advice stays affordable. The AUA-based fee is capped at 2.5% of assets under advice per annum per client, across all services offered by the adviser. The fixed fee is capped at ₹1,51,000 per client (family) per annum, across all services. SEBI has revised this figure (it was ₹1,25,000 earlier) and reviews it periodically, so check the current figure before you answer from memory.

Advance fees are allowed only for the period SEBI prescribes, and that period can differ by fee model. Check the current SEBI master circular and the NISM workbook for each model. Do not assume one universal period.

The adviser must also manage conflicts of interest. The adviser must disclose, in writing, any conflict that could affect advice. This includes any association with a product provider and any interest in the securities recommended. Advice and distribution must be kept separate. The adviser must not put their own interest ahead of the client's.

For complaints, the adviser should have an internal grievance process and must respond promptly. The client must first approach the adviser. If the client is not satisfied, the client can file a complaint on SCORES, SEBI's online complaint portal. If the grievance still remains unresolved, the client can approach SEBI's Online Dispute Resolution (ODR) platform.

Key formulas to remember

AUA-based fee ceiling
Maximum fee = 2.5% × assets under advice (per annum, per client)
Applies across all services to that client. The fee actually agreed can be lower.
Fixed fee ceiling
Fixed fee ≤ ₹1,51,000 per client (family) per annum
The cap applies across all services. SEBI has revised this figure and reviews it periodically, so check the current figure.
One model per client
AUA-based fee OR fixed fee, never both
A common trap option offers a mix of both.
Advance fee limit
Advance fee ≤ the period SEBI prescribes for the fee model
The permitted advance period depends on the fee model and is set by SEBI. Check the current master circular and do not assume one universal period.
Performance fee
Success or performance-linked fee = not permitted
Fees may be charged only under the AUA or fixed fee model.
Complaint route
Adviser → SCORES → ODR (if still unresolved)
SCORES is SEBI's online complaint platform. The client must first approach the adviser.

How to solve Fees, Disclosures and Grievance Handling questions

Most questions test one rule: a limit, a prohibition or a route. Use this method to find the answer.

  1. 1Identify what is asked: fee model, fee limit, disclosure duty or complaint route.
  2. 2For fee questions, decide whether the model is AUA-based or fixed fee.
  3. 3Apply the correct cap: 2.5% of AUA per client per annum, or the fixed-fee cap per client (family) per annum.
  4. 4Check the extras: no performance fee, no mixing of models, and advance fee not beyond the period SEBI prescribes for that model.
  5. 5For disclosure questions, ask whether the conflict could affect the advice. If yes, it must be disclosed in writing to the client.
  6. 6For grievance questions, put the steps in order: adviser first, then SCORES, then ODR if still unresolved.
  7. 7Check each option for words like 'always', 'both' or 'any amount'. These usually mark the wrong answer.

Quickest way: Rule-flag scan

When to use it: Use this when you have under a minute per question and the options list several rules.

  1. Underline the number or period in the question: 2.5%, ₹1,51,000, per family or per client, or an advance fee period.
  2. Match it to the rule: the AUA cap is a percentage per client, and the fixed fee cap is a rupee amount per client (family).
  3. Reject any option that allows both models, a performance fee or an advance period beyond what SEBI prescribes for that model.
  4. For complaints, pick the option that names SCORES as SEBI's online platform.
  5. For a fee calculation, multiply the AUA by 2.5% and compare with the proposed fee.

Common mistakes in Fees, Disclosures and Grievance Handling

  • Applying the 2.5% cap per family instead of per client.

    The fixed fee cap is per family, and the two get mixed up.

    Fix: Remember: AUA fee is per client, fixed fee is per family.

  • Thinking an adviser can charge both an AUA fee and a fixed fee.

    Students think two services can carry two fee types.

    Fix: One model per client. The fee cap covers all services together.

  • Treating 2.5% as the usual fee instead of the maximum.

    The number is easy to remember as a rate.

    Fix: 2.5% is a ceiling. The adviser and client can agree a lower fee.

  • Allowing a performance-linked fee as a third fee option.

    Students think a fee tied to returns is just another way to charge.

    Fix: Fees may be charged only under the AUA or fixed fee model, so performance-linked fees are not permitted.

  • Believing that conflict disclosure can be oral or only on request.

    Students confuse disclosure with answering questions.

    Fix: The adviser must proactively disclose conflicts in writing.

  • Taking SCORES to be the adviser's own complaint system.

    The name sounds like an internal portal.

    Fix: SCORES is SEBI's online platform. The adviser must also run its own internal redress.

Worked examples

Example 1

A client has assets under advice of ₹40,00,000. The adviser follows the AUA-based model and proposes an annual fee of ₹1,10,000. Is this within the SEBI ceiling, and what is the maximum fee?

Show the solution
  1. The AUA-based cap is 2.5% of assets under advice per annum per client.
  2. Maximum fee = 2.5% × ₹40,00,000 = ₹1,00,000.
  3. Proposed fee = ₹1,10,000.
  4. ₹1,10,000 is more than ₹1,00,000.

Answer: No. The fee exceeds the ceiling. The maximum permitted is ₹1,00,000 per annum.

Example 2

Which of the following is permitted for a SEBI-registered investment adviser? (A) Charging an AUA fee and a fixed fee to the same client (B) Charging a fee linked to returns earned (C) Charging an AUA-based fee within the 2.5% per-client ceiling (D) Keeping a conflict of interest confidential

Show the solution
  1. Option A mixes two models for one client. Not allowed.
  2. Option B is a performance-linked fee. Not allowed.
  3. Option C is an AUA-based fee within the 2.5% per-client ceiling. Allowed.
  4. Option D breaches the duty to disclose conflicts. Not allowed.

Answer: Option C is correct.

Exam tips

  • Learn the fee numbers exactly: 2.5% per client per annum, and the fixed fee cap of ₹1,51,000 per client (family) per annum. SEBI has revised the fixed fee cap and reviews it periodically, so check the current figure.
  • Watch the unit in the option: per client versus per family is a favourite trap.
  • Expect statement-type questions asking which rules are correct. Test each statement separately.
  • Know the order of redress: the adviser first, then SCORES, then ODR if still unresolved.
  • With negative marking of 25% of the marks for the question, skip an option you cannot place only after eliminating the clearly wrong ones.

Practice questions from Operational Aspects of Investment Management

Fees, Disclosures and Grievance Handling: frequently asked questions

What is the fee limit for investment advisers under the AUA model?

The fee cannot exceed 2.5% of assets under advice per annum per client. This covers all services given to that client. The adviser can agree a lower fee.

What is the difference between AUA-based and fixed fee?

In the AUA model, the fee is a percentage of the assets on which advice is given. In the fixed fee model, the client pays a flat agreed amount. The fixed fee cap is ₹1,51,000 per client (family) per annum, as revised by SEBI, so check the current figure. An adviser uses one model per client.

How do I complain about an investment adviser on SCORES?

You must first approach the adviser with your complaint. If you are not satisfied, you file the complaint on SEBI's SCORES portal against the registered adviser. If the matter is still not resolved, you can approach SEBI's ODR platform.

Must an investment adviser disclose conflicts of interest?

Yes. The adviser must disclose any conflict that could affect the advice to the client in writing. The adviser must also keep advice and distribution separate.