How Financial Advisors Are Paid

Brent O’Mara holds the Certified Fund Specialist and Accredited Investment Fiduciary designations, and the second of those is tied to a duty that begins, in practice, with a fee schedule. The schedule is an ordinary document: a page or two, often attached to an advisory agreement, that says what a client pays and how. Its form varies more than most people expect. Some schedules state a percentage of the assets an adviser oversees, some a flat price for a plan, some an hourly rate, and some say nothing about fees at all because the adviser is paid by commissions on what is bought. An industry research firm found that in 2024 fees made up 72.4 percent of advisor compensation, with commissions down to 23 percent of an average advisor’s revenue, and that 87 percent of advisors said at least half of their revenue came from fee based accounts.¹ The same report said that the average fee based on assets ran from 125 basis points for a client with $100,000 to invest down to 67 basis points when assets passed $10 million.¹

Figure

Where an average advisor's revenue came from in 2024

• Fees72.4
• Commissions23

percent

The main ways advisers are paid

The oldest arrangement in the modern advisory business is a fee on assets. A consumer magazine explained in 2024 that investment advisers typically charge an annual fee based on the amount of money they manage, and that 1 percent of assets is common.⁴ A newspaper feature made the arithmetic explicit: a person with $1 million to invest paying 1 percent would owe $10,000 in annual fees, and the feature noted that a client paying such a fee starts the year that far behind.³ The feature counted 249,400 financial advisers nationally, citing federal labor statistics, and observed that technically no license or education is required to use the title, which is one reason the method of payment tells a client more than the name on the card.³

Time based and project based fees are the second family. The consumer magazine reported hourly rates of $150 to $400, with a financial plan taking eight to twelve hours and costing around $3,000, and described newer subscription services typically amounting to about $3,000 a year; it added that some advisers work by the project or by the hour, but most are looking for clients whose finances they can oversee for years, and it suggested taking the free introductory meeting many advisers offer, where fees and the planning process are explained before anything is signed.⁴ A 2009 column pointed readers to advisers who charge by the hour for as needed help, while observing that many people may not be able or willing to pay $150 or more an hour.⁸ The newspaper feature suggested a yearly sit down at an hourly rate as a third option for people who find a percentage fee too steep, estimating that such advice would probably not exceed $1,000.³ The industry report found a divide between firms that fold planning into an advisory fee and those that charge for it separately, with a charge for creating a financial plan, used by 21 percent of advisors, running from $125 to $20,000.¹

Figure

Four ways of paying for advice

	How it is charged	What the source reported
Fee on assets managed	An annual percentage of the money overseen	One percent of assets is common
Hourly	A rate for time spent	$150 to $400 an hour, with a plan taking eight to twelve hours
Project or flat fee	One price for a plan	A plan could cost about $3,000
Subscription	A recurring monthly charge	Typically about $3,000 a year

Commissions are the third family, and the one with the longest history in retirement accounts. A public television report traced how the 1974 retirement plan law originally kept fiduciaries from accepting most commissions and revenue sharing payments, and how the Labor Department over time granted exemptions that moved the industry toward a model in which commissions and revenue sharing became commonplace, with industry groups arguing that this model let brokers serve small investors at low cost.⁷ That report also recorded the counterargument from consumer advocates, who said the arrangement presented a conflict of interest.⁷ Many professionals mix the families. The 2009 column described dually registered brokers who must act as fiduciaries when giving advice but need not when selling products on commission.⁸ The entry on the difference between an adviser and a broker describes that arrangement, and the entry on the registration behind an advisory firm explains where fee disclosures are filed.

Conflicts, disclosure and the words on the page

Each arrangement carries its own pull. A certified financial planner writing in a newspaper’s personal finance blog in 2012 argued that asking how an adviser is compensated is a different question from asking what a client pays, because compensation can include bonuses for meeting sales goals, spots on so called educational trips, or direct payments for selling particular products.² The post added that uncovering a conflict does not automatically mean something is wrong, only that it is important to know about.²

The law turns that knowledge into an obligation. A 2025 report quoted planners explaining that fiduciaries must not only put the client first but must disclose conflicts, which means being upfront about how they get paid and whether they receive commissions on certain products, and it pointed to the SEC’s public disclosure site, where an adviser’s Form ADV lays out how the adviser is compensated and what services are provided.⁶ The fiduciary side of that obligation is described under the Investment Advisers Act, and the broker side under Regulation Best Interest and Form CRS.

Figure

Questions a planner suggested asking in 2012

1. 01
   OneHow are you compensated, which is a different question from what will I pay.
2. 02
   TwoDo you get paid, or win anything, based on the products you recommend to me.
3. 03
   ThreeDo you receive compensation for our relationship from anybody other than me.

The vocabulary on a fee schedule is worth knowing. Fee only describes an adviser compensated only by clients, with no commissions for selling a product; the 2025 report defined it that way, and a professional association devotes a page to planners making the switch, listing the choice of compensation model as the first decision such a planner faces; the association also requires its registered advisers to hold the certified financial planner certification.⁵ Fee based, a term that sounds similar, is used in the industry research to describe accounts that charge a fee, and the report counted advisors whose revenue came at least half from such accounts, which is not the same as taking no commissions at all.¹ Basis points are hundredths of a percent, the unit in which asset fees are usually quoted.¹ Revenue sharing describes payments to an adviser from someone other than the client, the kind of arrangement the 2012 questions were designed to surface.² A commission is a payment tied to a transaction, and dual registration describes a professional who can earn one in one role and a fee in another.⁸ Which structure is sensible for a given household, and how fees interact with taxes and an estate, depends on each family’s circumstances, a judgment for qualified professionals rather than something a schedule alone can settle.