How Do Financial Advisors Make Money?

January 22, 2023


When it comes to hiring a financial advisor, there are two main business models to consider: commission-based and fee-only.

Commission-based advisors, such as life insurance agents and brokers, earn a commission for every dollar invested by a client. This commission can be quite significant, with first-year premiums for life insurance policies often being the bulk of the commission earned. Mutual fund companies also often have commission rates of around 3-5%.

On the other hand, fee-only advisors charge a fee for their services, usually around 1% of assets under management per year. This fee covers everything from investment advice to financial planning and portfolio management. Fee-only advisors may also offer hourly or subscription-based models.

It’s worth noting that the fee-only model is relatively rare in the financial industry. Only 2.5-3% of financial advisors are fee-only, with the other 97% of the industry having some form of sales or commission component.

A fee-based model allows people to keep a close eye on their clients’ financial situations and make adjustments as necessary. The financial world is constantly changing and a one-time plan may not be suitable for a client’s needs in the future.

In summary, when considering hiring a financial advisor, it’s important to understand the difference between commission-based and fee-only business models, and to weigh the pros and cons of each before making a decision. Ultimately, the best choice will depend on the individual’s specific financial needs and goals.

To learn more about our Abound Wealth, click here.

Most Recent Episodes

Financial Hacks and Habits of the Top 1% (By Age)

ho wouldn’t want to have a high enough income and net worth to be considered part of the top 1%? In this episode, we’ll tell you exactly how much you need to be considered part of the top 1% - and the habits and hacks those in the top 1% used to get there.   In this...

How to Win With Money in 2023!

Financial resolutions are always near the top of the list of Americans’ most popular New Year’s resolutions. Whether you want to save and invest more, pay off debt, or have other financial goals, we will give you the tools you need to win with money in 2023.   In this...

TikToks That INFURIATE Financial Advisors

The most powerful time to get serious about building wealth is when you’re young. So, what is the younger generation learning? Financial Advice (good and bad) is being produced in massive rates across online platforms and TikTok is the new frontier. Is there good...

5 Levels of Wealth AND How to Achieve Them! (2023 Edition)

We believe there are five distinct levels of wealth, but they aren’t solely dependent on income or net worth. We’ll walk you through each of the five levels - including how to know where you are at, how to advance to the next level, and signs you are doing it right.  ...

Average Net Worth By Age in 2023!

It’s time for one of our most anticipated shows of the year: our annual Net Worth By Age show! In this year’s edition, we’ll shared updated numbers and data for 2023 and discuss the most important things for you to focus on in each decade.   In this episode, you'll...

Win Financially During a Recession! (Everything You Need to Know)

The bear market we've experienced in 2022 has been longer than many in recent memory - and some are concerned that the economy may soon enter into a recession. Here's everything you need to know to stay on-track and win financially during a recession!   In this...

The Fed Just BROKE the Car Market! (What You Need to Know)

Car prices have been on a rollercoaster ride the last few years, and it looks like they might finally be coming down. In this episode, we’ll discuss what you need to know about the current car market, pitfalls of buying a car, and how to do it the right way.   In this...

Top 4 Money Mistakes People Make During the Holidays!

There’s a reason why financial resolutions are always near the top of the list in January - many Americans spend the holiday season making financial mistakes. In this episode, we’ll discuss the top money mistakes people make during the holidays and how to avoid them....

Financial Advisors Share What They WISH They Knew About Money Earlier!

Have you ever felt like if you just knew this one thing about money earlier your finances would be in a better spot? In this episode, we’ll share the five biggest things we wish we knew about money earlier!   In this episode, you'll learn: What we wish we knew earlier...