How your advisor is paid shapes the advice you get. There are three basic models, and two of them sound almost identical while working very differently. Here’s how to tell them apart.
How do financial advisors get paid?
Nearly every advisor fits one of three models. The label matters, because the way someone is paid creates the incentives behind their advice.
| Model | How they’re paid | Built-in conflict |
|---|---|---|
| Commission | By product companies when they sell you a product | Incentive to recommend products that pay them |
| Fee-based (hybrid) | Client fees AND commissions | Wears two hats — part adviser, part salesperson |
| Fee-only (non-commission) | Only by client fees | Fewest built-in conflicts (not zero) |
What’s the difference between “fee-based” and “fee-only”?
The names sound alike; they’re not. Fee-only (also called non-commission) means the advisor is paid only by client fees — no commissions, product sales, or referral payments. Fee-based means fees *plus* the ability to earn commissions. One word, a very different set of incentives.
Why does the pay model matter?
Incentives shape behavior. A commission or fee-based advisor can earn more by selling certain products, which is exactly the conflict fee-only is built to avoid. Fee-only doesn’t eliminate every conflict, but it removes the product-sales incentive that colors a lot of financial “advice.”
How many fee-only advisors are there?
Fewer than most people assume. NAPFA — the National Association of Personal Financial Advisors, whose members are all required to be fee-only fiduciaries — has grown to more than 4,600 members. Across the broader industry the shift is real but slow: by 2025 only about 1.9% of SEC-registered investment advisers reported charging commissions, down sharply over the prior 25 years. Fee-only is still a minority standard relative to the much larger universe of brokers and insurance agents — but a growing one.
How do you tell which kind you’re working with?
- Ask directly: “Are you fee-only?” and “Do you ever earn commissions?”
- Read their Form ADV Part 2A and Form CRS — they must disclose how they’re paid.
- Ask whether they act as a fiduciary in every recommendation, not just sometimes.
- Be wary if “fee-based” is used as if it means “fee-only.”
Frequently asked questions
Yes. “Fee-only” and “non-commission” describe the same thing: the advisor is paid only by client fees and earns no commissions or product-sales compensation.
No. Fee-based advisors charge fees but can also earn commissions. Fee-only advisors are paid only by client fees. The one-word difference reflects a real difference in conflicts of interest.
It reduces them, but no model is completely free of conflicts. Fee-only removes the product-sales incentive; a good advisor also discloses any remaining conflicts transparently.
Sources
Founder & Financial Planner · Investment Adviser Representative · Series 63 & 65
Ian McGinnis is the founder of Dental Wealth Partners and a fee-only financial planner dedicated to dentists. As an investment adviser representative (Series 63 and 65), he built the firm to give dentists coordinated, fiduciary advice across their practice, taxes, investments, retirement plans, and long-term goals — the whole picture in one strategy. A graduate of Belhaven University, Ian previously worked at Davis Private Wealth, MML Investors Services, and Northwestern Mutual, and is based in the Jackson, Mississippi area. He is the author of The Wealthy Dentist and hosts the Smiles & Cents podcast.
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