Commissions Versus Fees

Most advisors are paid either through commissions earned on investment transactions or through fees.  Some advisors are compensated by a combination of the two.

Commissions: 
Commissions are usually transaction based.  A commission may be charged with each buy and sell.  The commission percentage varies by product. Commissions typically come “off the top” of the investment amount.

Fees:  
Fees do not vary by product. Fees can be hourly, a flat annual retainer or based on net worth or assets managed.  Net worth or asset management fees typically vary from 2% to less than 1% per year (depending on the service).  Fees are typically debited from investment accounts.  

Advice:
Always ask for a clear explanation of how an advisor is compensated.  Understand all commissions, fees, and expenses.