Whether you’re thinking about hiring a financial professional or aren’t sure how much you’re paying yours, don’t be afraid to ask how they make their money. Tyler Dolan, CFP®, weighs in.

Do you budget for monthly subscriptions? Most Grownups subscribe to something, whether it’s the New York Times, Netflix, or Spotify, and the cost is known from the start. Even services like day care or a gym membership are up front about their monthly fees.

The same isn’t necessarily true when it comes to financial planning. If you asked someone exactly how much they pay their financial advisor, whether they’d know or not would be a coin flip. In fact, a recent survey shows that 51 percent of respondents didn’t know how much they were paying their advisor—or thought the service was free.

Why all the mystery? Grownups may not know to ask, are afraid to ask, or the advisor doesn’t want the consumer to know.

If I were shopping around for financial advice, asking how my potential new advisor gets paid would be one of my first questions. It’s important to know how your financial planner gets paid, and how much you’re paying them. Understanding both is key: How else could you measure the value your advisor provides?

So…how do financial planners charge?

There are tons of financial professionals out there, and they all seem to have different titles. There are financial advisors, wealth managers, brokers, financial consultants, insurance agents, financial planners, etc. It’s really confusing. Perhaps more frustrating, though, is some professionals call themselves “financial planners” or “financial advisors,” but their title is just a disguise for an insurance salesperson or an investment manager. (Don’t panic, though: To learn about what a real financial planner actually does, check out my earlier blog post).

News flash: Regardless of what your financial professional’s title is, they are (almost always) getting paid. Here’s how they make their money:


Many financial professionals are paid commissions for products they sell. They are commonly paid, similar to a real estate agent, by collecting a certain percentage of each sale. Financial professionals who collect commissions typically sell insurance, investment products, or a combination of the two.

Stockbrokers are the best examples. They earn commissions by selling shares of stock to their clients. Calling a client and selling $10,000 of XYZ stock with a 2 percent commission would net a stockbroker $200. It’s a similar process with an insurance agent. They’ll typically collect a certain percentage (it varies) of the first year’s premium of the policy.

Conflicts of interest may arise when a financial professional collects commissions from the products they’re selling. They’re still incentivized to sell you the product, even if it’s not in your best interest, and they get paid regardless. If you saw The Wolf of Wall Street, you witnessed how life as a stockbroker in the ‘90s was riddled with conflicts of interest. (Thankfully, there are much tighter regulations on the financial industry nowadays, and old-school stockbrokers are much less common.)


A financial professional getting paid on a fee-only basis works in the complete opposite manner of being paid by commission. Their compensation isn’t based on product sales at all. They still may offer financial products if they make sense, but they’re not getting paid to sell them.

Here’s how fee-only financial professionals commonly charge:

Flat fee—A financial planner typically quotes a price for a la carte financial services (such as retirement or college education planning) or a holistic financial plan (that includes everything necessary to meet your goals), and that’s it. Just like buying a laptop or a new pair of skis, you could pay a financial planner, for example, $2,000 up front or upon delivery of the plan. (Note the cost can vary widely.)

Hourly fee—Some financial professionals charge by the hour, similar to a lawyer. Just as a lawyer can quote a cost of let’s say $250 per hour for their services, a financial planner can do the same. (The rate will vary, of course.) If they think your financial plan will take six hours to put together, you’d pay $1,500 for their service at that hypothetical rate. If you need help building a budget and it can be taken care of within an hour meeting, you’d write a check for $250.

Retainer—Assets Under Management (AUM) fees are common among fee-only financial professionals. Under this arrangement, you pay a fee, such as 1 percent of the total amount of assets the professional manages for you. If you have a $100,000 investment portfolio, the financial professional will collect $1,000 from the portfolio on an annual basis. There would be investment products within the portfolio, but the financial professional wouldn’t be collecting any commissions under this arrangement.

It’s also common for financial professionals to structure their services based on a combination of these fee-only methods. For example, a financial planner could charge a $1,000 fee for writing a holistic financial plan, and also charge a 1 percent annual retainer (AUM) for managing your investments.


A financial professional who operates under a fee-based model can charge a fee for their services and commissions on the products they sell. Under this arrangement, it can often be difficult to figure out exactly how much you’re paying because the advisor can charge a few different fee sources. For example, a financial advisor under a fee-based model can impose a flat fee for financial planning, a 1 percent retainer for managing investments (AUM), collect commissions on insurance products they sell, and/or collect fees and commissions for trades within your account.

So…what now?

Whether you’re thinking about hiring a financial professional or aren’t sure how much you’re paying yours, don’t be afraid to ask! Most financial professionals, especially these days, will be transparent about how much you’ll pay. Plus, they’re often required to disclose that information. If you’re uncomfortable asking at first, start by looking at your statements. Sometimes there’s a “fees and expenses” section of the statement. If not, look for any debits (subtractions) from a “balance” or a “transaction” section. A good way to start a conversation about how much you’re paying is to ask your financial professional to walk you through your statement!

Today’s Grownups are starving for transparency. Along with tightening regulations, the financial services industry is recognizing consumer needs and is gradually moving away from commissions toward the fee-only and fee-based compensation models.

If you’re concerned about your financial professional having conflicts of interest, look or ask for a fee-only arrangement or seek out a planner who operates under a fiduciary standard, which requires that a financial planner acts solely in the client’s best interest when offering personalized financial advice.

And as a last resort—if you do your research and don’t like how he or she gets paid, you can always break up with your financial planner.


Tyler is a CERTIFIED FINANCIAL PLANNER™ practitioner who believes financial education can empower people to reach their goals.

While we hope the information in this article is useful, it’s only intended to provide general education and it’s not intended as legal, tax, or investment advice, and may not apply or be useful to your specific financial situation. If you need recommendations geared to your personal financial situation, schedule time with a financial planner.

Any third-party resources or websites referenced above are not under our control. We cannot guarantee and are not responsible for the accuracy of the resources, websites, or any products or services available through such resources or websites. Society of Grownups does not give tax or legal advice. You are encouraged to seek advice from a tax or legal professional.


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