Overseas advisory fees

Most of a retirement adviser's fees are negotiated. These three are not.

Where an adviser has been specifically allowed to serve eligible prospects outside India, the regulations cap what they may charge, and they do it in US dollars rather than rupees.

There are three ceilings, and which one applies depends on where the application goes.

If the adviser sources the application abroad and sends it to a Point of Presence in India — or gets the account opened through an online platform — the on-boarding fee is up to US$ 8.

If the adviser instead submits it to a branch of a registered PoP in that overseas territory, the fee is limited to US$ 2.

After the pension account is open, the adviser may collect service charges not exceeding US$ 1 per transaction for later services provided to that subscriber outside India.

Equivalent amounts in other currencies are allowed.

The three ceilings.

The logic of the first two is visible in the amounts. Where the adviser does the work of routing an application back to India, the permitted fee is four times what it is where a local PoP branch already exists to receive it.

Who may charge them at all. Only retirement advisers specifically allowed to render services to eligible prospects outside India. This is not a general entitlement attaching to every registered adviser.

How the domestic fee regime differs. For advice to a prospect, subscriber, or group or class of subscribers in India, a retirement adviser may charge advisory fees subject to any ceiling PFRDA may specify through notifications, guidelines, circulars or directions. Those fees are chargeable as per the written agreement between the prospect or subscriber and the adviser, must be fair and reasonable and commensurate to the services offered, and all fees and charges collected must be duly acknowledged by the issuance of appropriate receipts. So the domestic regime is a reasonableness-and-agreement standard; the overseas regime is a hard dollar cap.

The registration fees alongside them. Registration with the Authority itself carries a modest fee: an application fee of Rs 500 for an individual and Rs 1,000 for a non-individual, and a registration fee of Rs 1,000 and Rs 5,000 respectively.

The conduct rules that sit around any fee. Two of the adviser's general responsibilities constrain fee-taking directly. A retirement adviser shall not receive any consideration by way of remuneration or compensation or in any other form from any person other than the prospect or subscriber being advised, in respect of the NPS or another PFRDA-regulated scheme. And a retirement adviser shall not collect any amount in cash for investment or contribution to a subscriber's pension account in that capacity.

The PoP relationship that makes the overseas route work. A retirement adviser may tie up with registered PoPs for providing services to prospects, and there is no restriction on the number of PoPs with whom such arrangements may be made, provided subscribers' interests are not adversely affected. That is why both overseas routes exist: the adviser may be connected to a PoP in India and to a PoP branch abroad at the same time.

Ms Krishnan is a registered retirement adviser, specifically permitted to serve eligible prospects outside India. In one quarter she handles three cases.

Case 1 — Dubai, routed to India. She sources an application from an eligible prospect in Dubai and sends it to her tied-up PoP in Chennai for account opening.

Maximum on-boarding fee = US$ 8 (or the equivalent in AED)

Case 2 — Singapore, routed to a local PoP branch. A registered PoP has a branch in Singapore providing NPS services. She submits the application there.

Maximum on-boarding fee = US$ 2 (or the equivalent in SGD)

Same adviser, same work of persuasion, one quarter of the fee — because the destination of the application is what the regulation measures.

Case 3 — subsequent services. The Dubai subscriber from Case 1 later asks her, while still outside India, to help with four things over the year: a change of pension fund, a change of investment choice, a change of address, and a nomination update.

Service charges = 4 transactions x US$ 1 = US$ 4 maximum for the year

Her total from the Dubai client across the year

What she may not do. The Dubai subscriber's employer offers her a referral payment for steering employees to the NPS. She must refuse: an adviser shall not receive any consideration from any person other than the prospect or subscriber being advised. And when the Singapore prospect offers to hand over the first contribution in cash, she cannot accept it — an adviser shall not collect any amount in cash for contribution to a pension account.

What her registration cost. As an individual adviser, an application fee of Rs 500 and a registration fee of Rs 1,000. Had she registered as a firm, Rs 1,000 and Rs 5,000.

Chapter 9, section 9.4, item 2 (PFRDA (Retirement Adviser) Regulations, 2016), carries the fee provisions, with the overseas ceilings set out immediately after the domestic fee rule and the registration fees.

These are precise dollar figures in an otherwise qualitative section, which is exactly why they get examined. Expect: the maximum on-boarding fee a retirement adviser may collect from a prospect outside India where the application is sent to a PoP in India (US$ 8), where it is submitted to an overseas branch of a registered PoP (US$ 2), and the service charge for a subsequent transaction outside India (US$ 1 per transaction). The domestic contrast — fees by written agreement, fair and reasonable, subject to any PFRDA ceiling, with receipts issued — is asked alongside, as is the rule that an adviser may take no consideration from anyone other than the person advised.

• US$ 8 is the India-routed ceiling; US$ 2 is the overseas-PoP-branch ceiling. The larger fee goes with the longer route. Swapping them is the single most likely error.
• US$ 1 is per transaction, not per year or per subscriber. And it applies only to services provided to the subscriber outside the territory of India after the account is open.
• These caps apply only to advisers specifically allowed to serve prospects outside India. They are not a general fee schedule.
• Equivalent currency is permitted. The regulation does not require payment in dollars, only that the amount not exceed the dollar ceiling.
• Domestic fees have no fixed number. They are per the written agreement, fair and reasonable, commensurate with the service, subject to any ceiling PFRDA may specify — and receipted.
• Rs 500 and Rs 1,000 are application fees; Rs 1,000 and Rs 5,000 are registration fees. Individual and non-individual respectively in each pair, and these are rupee amounts, unlike the overseas fees.
• No consideration from anyone but the person advised, and no cash for contributions. Both prohibitions are absolute and cut across the whole fee discussion.