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Financial Professionals and Your Bottom Line

Financial Professionals and Your Bottom Line

March 07, 2023

Financial professionals help consumers to meet a variety of needs. Understanding which types of services are offered and the impact of a financial professional’s compensation on your bottom line may help you choose the one right for you.

A Financial Specialist may recommend consumer and small business products like accounts and loans at your local bank or credit union. A Financial Representative may sell insurance. A Financial Advisor may sell securities and give financial advice. A Financial Planner with CFP® certification may sell securities and give financial advice based on specific requirements established by the CFP Board.

Which type of financial professional might you prefer? In considering preference, you should understand how a financial professional’s compensation may impact you and the advice you receive. Financial professionals are paid based on salary, commission, commission trails, a percentage of assets under management (also known as fee-based), and/or fee-only arrangements. What does this mean and why is it important?

In a commission-based arrangement, a commission is paid when securities are bought and sold. For example, if a commission-based Financial Advisor buys $48,000 of an A-share mutual with a 5.75% up-front load on behalf of an investor, the Financial Advisor will receive a commission of 5.75%. In other words, $2,760 ($48,000 + 0.0575 = $2,760) is paid to the Financial Advisor and the investor’s invested dollars are reduced to $45,240 ($48,000-$2,760 = $45,240). Also, the Financial Advisor may receive trailing commissions from the mutual fund company for selling this fund.

In a fee-based arrangement, a flat rate is charged regardless of how often securities are bought and sold. If a Financial Advisor invests a client’s $48,000 in stocks (i.e., no expense ratios) and charges a 1.50% management fee quarterly, the investor will pay $180/quarter ($48,000*0.015 = $720; $720/4 = $180). If the account value increases or decreases, the investor will only pay 1.50% of the account value.

In a fee-only arrangement, an hourly rate or one-time fee is mutually agreed-upon and charged to the client once the financial plan or advice is delivered.

Understanding these arrangements is important because you may or may not be aware of potential conflicts of interest between you and your financial professional. Talk with your financial professional about this topic. Know what you are paying for and why.

Research a financial professional’s background using these resources: Financial Industry Regulatory Authority (FINRA) ; US Securities and Exchange Commission (SEC) ; Certified Financial Planner Board ; National Association of Personal Financial Advisors (NAPFA) and

Wendolyn Forbes is a CERTIFIED FINANCIAL PLANNER™ with Wealth Transition Finance, A Member of Advisory Services Network, LLC, where she offers financial planning and investment management services for either a one-time or on-going cost. Wendolyn is a fee-only financial planner and member of the National Association of Personal Financial Advisors (NAPFA). For more information about Wendolyn’s financial services practice, please visit her website at

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™ and federally registered CFP® (with flame design) in the US, which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.

This material is provided as a courtesy and for educational purposes only. Advisory Services Network, LLC does not provide tax advice. The tax information contained herein is general and is not exhaustive by nature. Federal and state laws are complex and constantly changing. Consult your own legal or tax professional for information concerning your individual situation.  

Originally published in the March 2023 issue of Positively Haywood by Vicinitus.