Some advisers are paid an annual salary. These advisers usually work for a bank, trust company or credit union. They provide advice about the products their financial institution offers, which limits what they can recommend to you. They often help clients with one-time buying decisions, but can also provide ongoing assistance.
2. Sales fees or commissions
Some advisers earn a sales commission every time they buy or sell an investment for you. If you buy a mutual fund, your adviser may also earn a trailing commission for as long as you own a mutual fund. This fee covers the cost of giving investment advice and providing other services to clients.
Commissions come out of your investment and are paid by the firm your adviser represents. If your adviser is paid a sales commission, ask them if they’ll make more money recommending one investment over another. If they will, check that the investment they’re recommending is one that will help you reach your goals.
Fee-only advisers are paid directly by you. They don’t earn any commissions. They may charge a flat fee based on the services they provide to you, or they may charge you by the hour. Once you agree on the fees, you know what you’ll get and how much you’ll pay.
For example, an adviser may quote $300 to build a financial plan for you. For this price, you may get 2 sessions with them. In the first one, the adviser will gather information from you to make the plan. In the second, you’ll meet to review the plan. There would be no ongoing help after these 2 sessions.
Or, a fee-only adviser may charge an annual fee based on the size of your portfolio.
Fee-based advisers get paid through a combination of fees (paid by you) and commissions (paid by the firm they represent).
Content in this section is provided in partnership with Investor Education Fund, a non-profit organization founded and supported by the Ontario Securities Commission that provides unbiased and independent financial tools to help Canadians make better money decisions. To find out more, go to: GetSmarterAboutMoney.ca