A robo advisor sets a mix of funds from a questionnaire and keeps you on that mix. A human adviser is paid to advise on the decisions a model portfolio does not make: a concentrated ESOP holding, the sale of a flat, insurance cover and what to do in a crash. Whether a person is worth the fee depends on whether those decisions are in front of you; Kriti's ₹50 lakh below puts a rupee figure on each next to a ₹50,000 yearly fee.
Is a robo advisor regulated like a human adviser?
Yes, when it charges for advice. SEBI treats anyone advising for a fee, by whatever name and through any means, as an investment adviser, so advice from algorithms carries the same fee caps and no-commission rule as a person's. A distributor's or stock broker's advice incidental to its main business is exempt. Who pays depends on the registration:
| Kind of platform | Registered as | Paid by |
|---|---|---|
| Robo advisor charging for advice | Investment adviser (SEBI) | Your fee only; direct plans |
| App selling regular plans | Mutual fund distributor (AMFI) | Trail commission from the scheme's expense ratio |
| App executing direct plans only | Execution-only platform or stock broker | A flat fee or a broker's charges, never from the scheme |
A fee-only human adviser sits in the first row, capped at 2.5% a year of assets advised, or ₹1,51,000 a year per family on a fixed fee (what an adviser may charge).
Kriti's ₹50 lakh: four decisions a model portfolio misses
Kriti, 36, earns ₹42 lakh CTC. She has ₹50 lakh in mutual funds, ₹40,000 a month to invest and ₹30 lakh in her listed employer's shares from vested ESOPs she exercised. An app offers a model portfolio in regular plans; a fee-only adviser quotes ₹50,000 a year, 1% of ₹50 lakh and inside both SEBI caps.
The concentrated holding
A model portfolio allocates the money it is given. If it puts 70% of the ₹50 lakh in equity, her equity with the shares is ₹65 lakh of ₹80 lakh, about 81%, and 37.5% of the ₹80 lakh sits in the company that pays her salary. A 40% fall in that one share would cost ₹12 lakh, 24 years of the fee.
If her scheme sets no lock-in and no trading window covers her, she can sell. ₹10 lakh of shares held over a year, valued at ₹6 lakh when she exercised and was taxed on them, carry a ₹4 lakh gain. Tax is 12.5% on the part above the ₹1.25 lakh yearly exemption, which her equity fund gains also use: ₹35,750 with cess, in a year she does not sell the flat (ESOP tax in India). Holding keeps the upside and the risk; options still to vest lapse if she leaves (ESOPs if you leave before vesting).
The flat
She is weighing whether to sell a flat she lets out, bought in 2015-16 for ₹45 lakh and now worth about ₹85 lakh. At 12.5% the ₹40 lakh gain would cost ₹5 lakh, but having bought before 23 July 2024 she pays the lower of that and 20% on the indexed gain: indexed cost about ₹68 lakh, gain about ₹17 lakh, tax about ₹3.4 lakh before surcharge and cess. The gain takes her total income past ₹50 lakh, so a 10% surcharge also adds about ₹74,000 to the tax on her salary.
Selling ends the rent and the property's price risk; keeping it keeps the rent and that risk. A house, or up to ₹50 lakh of five-year specified bonds, bought with the gain (sections 54 and 54EC of the 1961 Act) cuts the tax but locks the money.
Insurance cover
Her family, with a four-year-old, depends on her income; her only cover is a ₹1 crore term plan bought at 29. At ₹14 lakh a year of family spending, ₹1 crore pays about seven years (is ₹1 crore term insurance enough); the 10 to 15 times rule of thumb says ₹4.2 crore to ₹6.3 crore. Another ₹3 crore, taking her to ₹4 crore, just under that range, costs a 30-year-old about ₹24,000 to ₹45,000 a year at 2026 rates, which vary by insurer, and more at 36; less cover leaves the gap to her investments.
What to do in a crash
A 30% fall takes the model's ₹35 lakh of equity to ₹24.5 lakh, ₹10.5 lakh lower on paper, 21 years of the fee. Selling stops any further fall on what she sells but makes that part of the loss real and leaves it out of any recovery; holding leaves her exposed to both a further fall and a recovery. A model rebalances by its rule; redeeming or pausing the SIP is her decision. The same risk is larger near retirement (sequence of returns risk), and the fee is paid every year, crash or not.
What does each option cost a year on ₹50 lakh?
Financial adviser fees are paid by you, in rupees. A fixed fee like Kriti's quote does not grow with the portfolio; trail does, and so does a fee charged as a share of assets. On Kriti's ₹50 lakh:
| Option | Cost a year | How it is paid |
|---|---|---|
| Model portfolio in regular plans | About ₹45,800 | Trail inside the expense ratio, at an illustrative 0.916% |
| Robo advisor charging for advice | Set by each provider, so it varies; within the same caps | Billed to you; direct plans |
| Fee-only human adviser | ₹50,000, or ₹59,000 if the adviser charges 18% GST | Billed to you; direct plans |
The trail rate is the illustrative one in trail commission, whose three illustrative schemes work out at about 0.7% to 1.1%; your consolidated account statement prints the actual rupees.
When is a model portfolio enough on its own?
When none of the four is in front of you: no holding that is a large share of your wealth, no property sale or large sum due, cover sized against your family's spending, and a plan, made in advance, for a fall. What is left is allocation and rebalancing, which a model portfolio does. Kriti faces three this year, and a fall can come in any year; the ₹50,000 buys a second view on each before she acts, the complex case in financial planning basics.
Dhi shows employer shares, a let-out flat and term cover in one picture with your cash flow, net worth and goals. Dhi works out from your own numbers what share of your wealth sits in one employer's shares, or how many years of spending your cover would pay.
Frequently asked questions
This is general information for salaried individuals in India, not personalised financial advice.
