What Is Fee-Based Advisory Versus a Commission-Based Advisory? 

What Is Fee-Based Advisory Versus a Commission-Based Advisory? 

Date: April 10, 2020,
In: About Us

If you want to take your future in your hands and get control of your economic situation, meeting with a financial advisor and creating a financial plan is key. But before you hire just any financial planner in Indiana, it’s smart to know how different financial advisors may charge. Here’s a look into the differences between fee-based advisory and a commission-based advisory. For more information, call our CERTIFIED FINANCIAL PLANNERS™ (CFP®) today. 

Fee-Based Advisors

Financial advisors get paid in one of two ways: either by collecting fees or getting a commission. If you hire a fee-based advisor, then you, as the client, will pay fees to your advisor. These fees can be paid in two ways:

  • Share of your assets. Your advisor will recommend various asset allocation strategies and, in some cases, may collect a fee based on your assets. 
  • Flat fees. Another way that a fee-based advisor may get paid is through the collection of a flat fee. Many financial advisors are switching to a flat-fee based system, where clients pay a standard flat fee for planning services instead of a fee based on assets under management (AUM) or commissions. 

 Note that while a fee-based advisor may be compensated through a combination of fees and assets under management, they may also collect a commission. Only “fee-only” financial advisors may not get paid through a combination of fees and commissions. 

Commission-Based Advisors

Unlike a fee-based advisor, a commission-based advisor will be paid based on the accounts that they open or the products that they sell (i.e. insurance packages, mutual funds, etc.). The more accounts that a commission-based advisor opens or the more financial transaction that they complete, the more that they will get paid.

While there is nothing inherently wrong with this, it does beg the question of a potential conflict of interest and whether or not a breach of fiduciary duty may occur. Note that a commission-based advisor may be a fiduciary, but isn’t necessarily one; it’s important to ask before you hire. 

Learn More from Harvest Financial Planning, LLC Today

At Harvest Financial Planning, LLC, our financial advisors and financial planning professionals are all fiduciaries, which means that we have a legal duty to work in our clients’ best interests. You can trust that we will put your financial interests first, and that any fee structure that’s in place won’t get in the way of that.

We offer no-cost initial meetings for prospective clients. To learn more about how our professionals may be able to help shape your financial future in a positive way, call our team directly or send us a message requesting more information. 

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