How are financial advisors paid?

Question

Zippia Team · Accepted Answer

Financial advisors are paid either by earning flat fees, earning commissions, having an annual company salary, or some combination of the three.

All financial advisors have their own unique pay structures. However, a financial advisor will always be paid in one or a combination of these means:

Client fees
Client fees, also known as flat fees, are usually determined on an hourly basis, fixed basis, or as a percentage of each of their client's assets under management.
When a financial advisor charges fees on an hourly basis, it is usually for one-time consulting agreements or for financial planning services.
Many financial advisors earn these fees directly from their clients. Fee percentages can differ depending on how much a client invests with a financial advisor.
Some advisors also build in a performance fee in this instance. This allows them to charge their clients additional amounts of money for exceeding expectations in returns.
Commissions
Commissions apply to certain financial transactions, like the sale of insurance products or the selling or buying of particular securities.
Advisors earn commissions when they recommend and ultimately sell clients on using a specific financial product or service. These include things like annuities and mutual funds. They often receive these in addition to any client fees.
Salaries
Certain financial advisors receive annual salaries from an investment firm that employs them.
In addition, these advisors also have the chance to earn additional compensation in the form of bonuses or incentive programs. These usually reference a certain milestone, such as gaining a certain amount of clients in a year.

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