Advisor Earning Comparison
Fee-only advisers vs. Commission-based advisors
Understanding your adviser’s fee structure is critical to building a lasting, honest relationship. To help clarify, here are two terms that you need to know:
- Fee-only: A fee-only relationship means that your advisor earns an hourly rate/fee, a project fee, or a percentage based on the amount of assets they manage for you. These advisers generally have a fiduciary responsibility to act in your best interest. This compensation structure is preferred by many because it puts the advisor on the same side of the table as the client – as the client does better so does the adviser.
- Commission-based: A commission-based advisor is compensated with each investment transaction. They are incentivized to keep you actively trading, reassessing, and moving. They may also be compensation to sell certain popular investment packages. These advisors may also use the phrase “fee-based.” While it may appear similar to “fee-only,” it likely means the advisor is earning a fee and a commission.
Want to learn more? Use the infographic below to further clarify the difference between a fee-only and a commission-based advisor.