November 2025

When Paying Fees Hurts: Why Investors Favour Commissions
Nobel Prize–winning behavioural economist Richard Thaler showed that people spend far more when the payment feels painless — like using a credit card instead of cash. The “pain of paying” is strong when money leaves your hand, but much weaker when the cost is hidden or delayed. The salience also drops because the price of a ticket gets buried among dozens of items in the credit-card bill. A ₹10,000 ticket feels expensive on its own, but as part of an ₹80,000 bill it seems acceptable.
This simple insight explains why investors resist paying visible fees to advisers but readily accept commissions embedded in financial products. Fees deducted from investments (as in PMS) are also less painful than fees paid separately by cheque.

This pattern holds worldwide: wherever investors can choose between commissions and fees, most pick commissions because they feel painless. Only in countries like the UK and Australia — which have banned commissions — do large numbers of investors pay fees directly.