It’s a simple question – but the answer reveals who you can truly trust.
How a financial advisor gets paid — and where that payment comes from — can tell you a lot about how they operate and whose interests come first. The most common fee structures are fee-only, fee-based, and commission-based. They sound similar but mean very different things.
In this post, we’ll break down what those models really mean, how they affect the adviceyou receive, and what to look for when choosing a financial advisor.
Fee-Only, Commission-Based, and Fee-Based: What’s the Difference?
Let’s start with the basics. Here are the three most common compensation models:
Fee-Only
Fee-only advisors are paid only by their clients. They typically charge a percentage of assets under management (AUM), a flat fee, or an hourly rate. They don’t receive any commissions from third parties for selling products.
What this means for you: Their only financial incentive is to give you good advice. There are fewer conflicts of interest, and fee-only advisors are typically held to a fiduciary standard.
Commission-Based
These advisors earn money through commissions on the financial products they sell — like insurance, annuities, or mutual funds. Those commissions are paid by the third-party companies that create the products, not by you directly.
What this means for you: Their recommendations may be influenced by how they get paid. These advisors are generally held to the suitability standard — meaning their advice must be “suitable,” but not necessarily the best option for you.
Fee- Based
Fee-based advisors charge clients directly (like fee-only advisors), but may also earn commissions from product sales.
What this means for you: It depends on the advisor. Some use a fee-based structure while still operating with a fiduciary mindset and prioritizing transparency. Others may lean more heavily on commission-based products. It’s important to ask questions.
How Compensation Affects Financial Advice
Ever heard the saying, “Never bite the hand that feeds you”? When an advisor’s income depends on selling a specific product, it can create subtle (or not-so-subtle) incentives — even if they genuinely want to do right by you.
That’s why it’s so important to understand how your advisor is paid. Compensation structure can shape recommendations, influence investment choices, and ultimately affect whether the advice you get truly serves your best interest.
At Insight Capital, we uphold the fiduciary standard in everything we do. Our advice is designed to serve your best interest, not to sell you a product.
Beyond Fees: What Are You Really Paying For?
Here’s the bigger picture: Fees matter, but they’re only part of the story.
Are you paying for someone to pick investments? Or are you getting a financial partner who helps you navigate retirement, taxes, estate planning, major life events, and more?
A good advisor provides more than just portfolio management. They provide clarity, strategic thinking, and guidance when you need it most. That’s where the true value lies.
What a Real Financial Partnership Looks Like
High-value financial advisory firms share some common traits:
- They answer your calls.
- They know your goals, your family situation, and your risk tolerance.
- They take time to educate and explain.
- They proactively help you plan for what’s ahead — not just react to markets.
At Insight Capital, for example, we’re a small, tight-knit team — large enough to always answer the phone, but small enough to know our clients personally. That allows us to give tailored advice that fits the full context of your life, not just your account balance.
Questions to Ask When Choosing an Advisor
To make sure you’re getting the value you deserve, ask these questions:
- How are you compensated?
- Do you act as a fiduciary at all times?
- Do you receive commissions from any financial products?
- What services are included in your fee?
- How often will we communicate?
- How do you tailor advice to my unique situation?
Bottom Line
Understanding how your financial advisor gets paid is about more than comparing fee percentages. It’s about understanding incentives, expectations, and the level of service you’ll receive.
Great financial advice should go beyond investments. It should be built on trust, expertise, and a deep understanding of your life by someone who truly cares about you.
If you want clarity on how different fee models work or have questions about your own financial situation, we’re always here to help.