Fee-Only vs. Commission: How Advisors Get Paid
How your advisor gets paid determines what they can afford to recommend. It is the most predictive single fact about the advice you will receive, and it is deliberately hard to pin down — largely because the industry uses three terms that sound nearly identical and mean very different things.
Fee-only
The advisor is compensated exclusively by clients. A flat annual planning fee, a percentage of assets under management, an hourly rate, or some combination — and nothing else. No commissions, no revenue sharing, no referral payments, no bonus for selling the house product. The only way a fee-only advisor earns more is by keeping clients or growing their assets.
This does not make fee-only advisors saintly. It makes their conflicts small, visible, and aligned. An AUM advisor still has a mild incentive to discourage you from paying off a mortgage with invested assets. A flat-fee advisor has no such incentive, which is one reason flat-fee planning has grown quickly among advisors serving high earners without large portfolios yet.
Fee-based
This is the term that costs people money. Fee-based means the advisor charges a fee and can also earn commissions. One word apart from fee-only, and a completely different compensation structure. If a website says fee-based, assume there is a commission side to the business and ask directly what it consists of.
Commission
The advisor is paid by the product manufacturer when you buy. A front-end load on a mutual fund can run several percent of the amount invested. Whole life and indexed universal life commissions commonly approach the entire first-year premium. Annuity commissions typically run in the low-to-mid single digits of the contract value, often paired with a surrender period of six to ten years during which withdrawing your own money triggers a penalty.
The advice itself is frequently framed as free. It is not free; it is bundled into the product's cost and paid over years in ways that never appear as a line item on a statement.
What each model actually costs
AUM pricing has traditionally clustered around one percent annually, declining at higher asset levels. Flat-fee comprehensive planning generally runs in the low thousands to roughly ten thousand dollars a year depending on complexity. Hourly engagements typically run a few hundred dollars an hour. Commission compensation is invisible by design, which is precisely the problem — you cannot compare a cost you are never shown.
The right question is not which model is cheapest in year one. It is which model still makes sense in year fifteen, when your portfolio is larger and your planning needs are roughly the same.
How to verify it in about five minutes
Look up the firm on the SEC's Investment Adviser Public Disclosure site and on FINRA BrokerCheck. Read Form ADV Part 2, Item 5 for the fee schedule and Items 10 and 14 for other compensation arrangements. If the advisor is also a registered representative or holds an insurance license, both will show. Then ask the direct question: "Do you receive any compensation from anyone other than me?" A fee-only advisor answers no in one word.
Why this lands harder on queer households
Commission-heavy products are disproportionately marketed as solutions to insecurity, and LGBTQ+ households carry real, well-founded insecurity about legal recognition, partner protection, and access to care. Permanent life insurance sold as "the way to protect your partner" and annuities sold as "guaranteed income you cannot outlive" both land in that gap. Sometimes those products belong in a plan. They should never be the opening recommendation from someone who gets paid when you say yes.
Aequitas is fee-only and fiduciary at all times: paid by clients, by nobody else, with no products to sell. If you are comparing advisors, our overview of LGBTQ+ financial planning is a reasonable place to see what the work looks like when there is no product attached to it.