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Apr 20, 2023

What You Should Know About Advisor Fees

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Lori Gann Morris, CIMA®, AIF®, CeFT®, Co-Founder / Managing Partner

Financial advisors and planners help you manage your investments and work toward your financial goals, such as estate and retirement planning. In return for their expertise and guidance, some advisors will charge a flat fee, while others work on commission. Some may even do both. But how are those fees determined and who pays for them? Whether you’re already working with an advisor or just starting to explore your options, make sure you understand their fee structures so that you can be sure that you’re getting the best fit for your needs. This overview can help you start that conversation.

Commission-based financial advisors

Financial advisors working on commission tend to be brokers compensated based on product sales. While they receive payment when you make an investment on their recommendation, typically their commissions are not drawn from your investment. They’re usually paid out by the investment product sponsor. In most cases, the advisor will receive an initial disbursement when the investment contract is signed and an additional annuity for every year that contract remains active. Some financial products — life insurance, for example — are only sold on commission.

As a result, commission-based advisors are effective representatives for certain products. They are held to a suitability standard, meaning product recommendations must be suitable to a client’s needs but may be more expensive than other options. Brokers are incentivized to offer more expensive options to increase their commission. As a result, the commission introduces the possibility of a conflict of interest in the advice these advisors provide.

Fee-based financial advisors

Some financial advisors will charge a set fee for their services. These fees may take the form of an hourly rate, a project fee, or a percentage of assets under management they handle on your behalf.

Additionally, some advisors may operate strictly on a single fee structure, while others may combine them. For instance, your advisor may begin working with a flat fee and then continue working on a percentage of the assets they manage.

In most cases, fee-based financial advisors are fiduciaries, which means they are legally required to act in their client’s interest, building plans and choosing products that are ideally suited to your needs. By law, they must recommend products and services to you that best meet your requirements rather than those that might provide them a commission.

Dual-registered advisors

In some cases, fiduciaries may be dual-registered, meaning they are registered as both fiduciaries and brokers. This means they can act as fiduciaries when creating your financial plan and also draw a commission when putting the plan into action. In such cases, the advisor may offer clients a roster of “preferred” financial products within their role as fiduciary and collect commissions if and when clients invest in them. That said, if there are cheaper options that offer the same benefits as a fiduciary, an advisor must present them as an option.

If you’d like to understand our fee structure, let’s have an open conversation so you can better understand the services we offer and how we charge for them. It’s important to us that you feel confident and informed about our working relationship, and we’re happy to provide you with any information you need to make the best decisions for your financial future.

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Securities offered through Calton & Associates, Inc. Member FINRA/SIPC. Advisory services offered through of Waterloo Capital LP d/b/a AMG Wealth Advisors, an SEC-registered investment advisor. Calton and Waterloo Capital, LP are separate unrelated entities. For more information about Waterloo, or to receive a copy of our disclosure Form ADV, Form CRS and Privacy Policy call 800.266.1723 or visit

Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities or to advise on the use or suitability of The AMG Managed Portfolio Series, or any of the underlying securities in isolation. Information specific to the underlying securities making up the portfolios can be found in the Funds’ prospectuses. Please carefully read the prospectus before making an investment decision.

This commentary offers generalized research, not personalized investment advice. It is for informational purposes only and does not constitute a complete description of our investment services or performance. Nothing in this article should be interpreted to state or imply that past results are an indication of future investment returns. All investments involve risk and unless otherwise stated, are not guaranteed. Be sure to consult with an investment & tax professional before implementing any investment strategy.

Investing involves risk. Principal loss is possible. Investing in ETFs is subject to additional risks that do not apply to conventional mutual funds, including the risks that the market price of the shares may trade at a discount to its net asset value(“NAV), an active secondary market may not develop or be maintained, or trading may be halted by the exchange in which they trade, which may impact a fund’s ability to sell its shares. Shares of any ETF are bought and sold at Market Price (not NAV) and are not individually redeemed from the fund. Brokerage commissions will reduce returns. Market returns are based on the midpoint of the bid/ask spread at 4:00pm Eastern Time (when NAV is normally determined for most ETFs), and do not represent the returns you would receive if you traded shares at other times. Diversification is not a guarantee of performance and may not protect against loss of investment principal.