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Market Intelligence › Basic Terminologies
Fee only, commission and performance based — the incentives of all three differ
Published by The Retail Trader · AUG 04, 2026 · Advisory & Research
Before the quality of the advice, one more thing matters — how the advisor gets paid. Their incentive often indicates the direction of their advice.
In the fee only model you pay fees directly and the advisor gets nothing from the product. The conflict is lowest here, but the cost is visible upfront.
In the commission model the advice seems free and the money comes from the product. Here the incentive tilts toward the product that pays more.
In the performance linked model the fees come out of profit. It seems aligned, but it can also give an incentive to take more risk.
These can be asked of any advisor:
• Do you receive any commission from this recommendation or not.
• What will your total annual fees come to in rupees.
• Are you fee only, and is that in writing.
• What charges apply if I exit.
There is no such thing as "free advice" — its price sits somewhere, often inside the product. Knowing where that price sits is the most direct way to test advice.
This article is for educational purposes only — it is not a buy or sell recommendation, makes no guaranteed-return claim, and is not advisory. Rules, rates and mechanics are changed from time to time by the exchanges, SEBI and RBI, so verify every number yourself with your broker or an official source.