What is a fee-based financial advisor?

A fee-based financial advisor is not paid in the same way as a fee-only advisor. While a fee-based financial advisor also charges fees to their clients, they can also generate additional income through commission on the financial products they recommend. They may also charge a performance-based fee.

How do fee-based financial advisors make money?

In addition to earning money through one or more of these fee types, fee-based financial advisors also make money from other sources. In short, if your advisor earns money through anything besides a fee for the management of your portfolio, your advisor is fee-based rather than fee-only. Advisors won’t necessarily advertise their fee structures.

What is the difference between fee-only and fee-based financial advisors?

The difference is that a fee-only advisor removes even the semblance of a commission-based conflict of interest by disallowing themselves to earn sales-related compensation. Fee-based financial advisors earn money from sources beyond the fees their clients pay, such as through commissions and brokerage fees.