Update
Update
The question pops-up now is if it is a bad idea to pay a financial advisor a fee for offering advisory services, pre-investing and post-investing. Mutual Fund advisors are struggling to convince existing as well as prospective investors to pay them service charges for the services rendered while investors are thinking if they should pay.
Every service requires remuneration to be paid. Even a company that sells a water-purifier, refrigerator, television and an air-conditioner charges an annual maintenance fee to maintain the health of the underlying asset. To invest in Mutual Funds and other financial assets it requires expertise and charging a fee for that expertise is acceptable so why this hue and cry about charges?
A financial advisor is a person who advises financial (investment) products to an individual or a family that encompasses several decades of financial well-being, hence, it is the right of the advisor to get paid for such services rendered. Fortunately,the market regulator of Mutual Funds has not made it mandatory for an advisor to charge a fee separately but is paid by the Mutual Fund company as part of the expenses booked into the Fund/Scheme through the NAV. Of course this fee comes from the returns that an investor gets over the duration of staying invested. When an investor chooses to invest through an advisor and ticks the "regular" option the fee gets paid to the advisor through the duration of investment.
Even in case of any consumer durables purchased, until the product is not sold at a future date the fee that is paid as maintenance will get added to the original product price. For example, if you purchase an air-conditioner for ₹ 30,000 and you pay ₹ 2000 for annual maintenance over the next 10 years then the cost of ₹ 20,000 gets added to the original cost you had paid. So, these types of charges after buying a product is common and we have accepted it.
It should also be noted that after buying an air-conditioner we do not try to repair or service the product ourselves because it requires an expert to do it. Similarly, to maintain the health of the investment portfolio it requires an expert and let that expert handle the intricacies and by paying the fee demanding such service is the right of the investor.
In Mutual Fund and insurance investing such additional annual fee is not required to be paid, as mentioned earlier, since the advisor is getting paid through the expenses of the scheme. All an investor has to do is to engage or appoint a qualified advisor, choose the "regular" option and demand the service that is expected.