The Story
A few months ago, I was speaking to an old colleague. Let’s call him R. We’d worked together many years earlier, and today he’s financially successful by almost any conventional measure — a good career, a good income, property, investments, a substantial retirement corpus. And, as often happens when income and wealth grow, his financial life had also become complicated: multiple mutual funds, structured products, insurance-linked investments, alternative investments, different advisers for different parts of the portfolio, and an annual wealth-management fee sitting quietly on top of all of it.
I asked him a simple question: how much was he actually paying every year to manage that wealth? He paused, then gave me a number — roughly 1% of his investible wealth. I asked how much that came to. His investible wealth was around ₹5 crore. Which meant the answer was close to ₹5 lakh a year — about ₹41,667 a month.
That’s the moment the conversation became interesting. Because “just 1%” doesn’t sound frightening when someone says it out loud. But at ₹10 crore, that same 1% becomes ₹10 lakh a year. At ₹25 crore, ₹25 lakh. At ₹50 crore, ₹50 lakh. Suddenly, “just 1%” stops sounding small.
The Real Question
This isn’t an attack on financial advisers. A good adviser can add enormous value — tax planning, estate planning, succession planning, asset allocation, international exposure, risk management. Someone with operating businesses, trusts, multiple jurisdictions and succession issues has problems an FD cannot solve. But the question I want to ask is narrower and, I think, more useful: does a ₹2 crore or ₹5 crore portfolio automatically require an expensive, complicated investment architecture? I don’t think it does.
Before selecting products, shouldn’t we first ask what the objective actually is — capital preservation, retirement income, long-term growth, a child’s education, wealth transfer, liquidity, inflation protection, estate planning? The product should follow the objective. Not the other way around.
Consider the basic building blocks already available to an Indian investor: fixed deposits for predictable capital and income; recurring deposits for disciplined accumulation; PPF for long-term, government-backed savings within its rules and limits; NPS for retirement-oriented investing within its framework; index funds for low-cost, diversified equity exposure — SEBI itself describes index mutual funds as passive funds designed to replicate an index, valued for their diversification, simplicity and generally lower costs relative to actively managed funds; and gold or silver ETFs for investors who want precious-metal exposure without holding the physical metal. None of these are magical. The point is simply that wealth creation does not automatically require exotic products.
The Math Behind “Just 1%”
Imagine ₹5 crore compounding at an illustrative 10% gross annual return, with no advisory fee or other costs. After 20 years, the hypothetical value would be approximately ₹33.64 crore. Now suppose that same portfolio effectively loses one percentage point every year to an annual wealth-management fee, simplified here to a 9% net return. After 20 years: approximately ₹28.03 crore. The difference — roughly ₹5.61 crore — is an illustration, not a forecast. Actual returns fluctuate, fees are structured differently across providers, and taxes and product expenses matter too. But the arithmetic teaches something real: a recurring percentage fee becomes far more significant as wealth compounds.
Which is why the right question was never simply “is 1% expensive?” It’s “what am I actually receiving for that 1%?” If an adviser charging ₹5 lakh a year helps you avoid a mistake that could have cost ₹50 lakh, or restructures your asset allocation, insurance, taxation, succession and liquidity in a way that materially improves your family’s position, that fee may have created real value. But if the service consists largely of selecting ordinary mutual funds, sending quarterly statements, occasional rebalancing, and market commentary — things you could reasonably understand and do yourself — then ₹5 lakh deserves a harder look. That isn’t an anti-adviser question. It’s a value-for-money question.
Complexity Is Not the Same as Sophistication
We often mistake one for the other. A portfolio holding seventeen funds can look more sophisticated than one holding three — but does it produce a better outcome? A twenty-five-page financial plan can look more impressive than a two-page one — but does it create more wealth? A product with five features can sound better than one with a single, clear purpose — but do you actually understand all five? My own philosophy has stayed simple through thirty years of watching this play out: don’t buy complexity to feel wealthy. Buy clarity to become wealthy.
There are, of course, situations where professional advice is genuinely worth paying for — multiple businesses, substantial overseas assets, complicated family succession, estate and trust planning, concentrated stock exposure, significant tax complexity, inter-generational wealth transfer, or simply not having the time, temperament or inclination to manage a portfolio yourself. In these cases the adviser isn’t just selecting a product — they’re solving a genuinely complex problem, and that is valuable.
But this matters just as much for the aspiring HNI — the person who has crossed ₹50 lakh, then ₹1 crore, then ₹2 crore, and suddenly finds everyone wants to manage their money. The temptation is to believe that having money now means needing sophisticated products. Often, what’s actually needed first is far less glamorous: an emergency reserve, adequate insurance, debt discipline, sensible asset allocation, low-cost diversified equity exposure, retirement planning, basic tax awareness, and a written financial plan. Wealth creation rarely requires glamour. It requires discipline.
Five Questions Before You Pay 1%
Before paying anyone a percentage of your wealth every year, I’d ask five questions: What exactly are you doing for me — not “wealth management” as a phrase, but specifically? What would I lose if I didn’t have you? Can I actually understand the products being recommended — because if you can’t explain a product to yourself, don’t mistake its complexity for sophistication. Is the fee charged on my entire asset base, and does it keep growing simply because my wealth grows? And finally — can I pay for advice without also being sold products I don’t need?
That last question, in my experience, is the one that matters most.
The Deeper Question
R’s problem was never really about the 1%. It was something underneath it — he had accumulated enough wealth to have real choices, but he’d never stopped to ask whether the machinery surrounding that wealth was actually necessary. Perhaps the wealthier we become, the more important simplicity becomes. When you have ₹5 lakh, every decision matters. When you have ₹5 crore, every percentage point matters. When you have ₹50 crore, the structure matters enormously. But at every level, the same question holds: does this financial decision improve my wealth, protect it, or simply make it look more sophisticated?
Wealth isn’t built by owning the maximum number of financial products. It’s built by owning the right assets, controlling costs, managing risk, and letting compounding do the rest of the work quietly, in the background, for a long time. And sometimes, the smartest portfolio is also the simplest one.
A Note Before You Read This as Advice
This article is not financial advice, and it isn’t a recommendation to hire or avoid any adviser, or to buy or avoid any product. It exists for a narrower purpose — to help you ask better questions before you sign anything or pay anyone.
Before you pay for anything — a product, an adviser, a fee — ask yourself:
- Why am I investing it?
- What am I paying for?
- Who benefits from this decision?
— Joydeep Bagchi
This is not advisory. It’s meant to help you think.