How do we get paid?

In Canada, financial advisors are paid for their expertise in recommending and providing solutions specific to your situation. How financial advisors are paid has become more transparent over the years. Have you ever wondered how advisors get paid? It’s an important question. The way your advisor is compensated can affect the type of investments he or she recommends to you. The fee for service Financial Planner in Canada can work a few different ways:

• Client fees
• Commissions
• Salary
• Bonuses

In most cases, advisors are compensated in a combination of these ways.

Client Fees: When you go with the client fees option, you pay the advisor for their services directly (fee-only) or indirectly (fee-based). A flat fee means a one-time fee.
A direct fee means a Certified Financial Planner may charge a flat fee to create or review your financial plan. Again, it’s clear what is being charged and what you will receive in return – advice, recommendations, time, etc.

An indirect fee means a financial advisor will get paid a small percentage of your investment. This is called the management expense ratio (MER), usually 1%-2.5%. It’s taken out of your account before the performance is calculated.

Commissions: This is one of the most common methods of financial advisors being compensated. Financial advisors are paid a commission based on their clients’ insurance or investment solutions. Commissions take many different forms but generally fall into two categories: upfront fees and transaction commissions.

Salary: Financial advisors may work at a financial institution, like a bank. They may also earn client fees, commissions and bonuses. Salary is especially true for new advisors that are still building their client base. Many financial advisors may have a ‘base’ salary, and the bulk of their income is derived from a combination of the three other sources of income previously mentioned.

Bonuses: Many financial advisors earn additional revenue, including bonuses, based on performance and meeting specific criteria. An example would be achieving sales targets stipulated by their firm, increasing the number of new clients, or selling particular types of products.

Here at Shoreline Financial & Insurance services, we are compensated in two ways for our time and services. This includes fee only and indirect fees and commissions. Most importantly, we want to ensure that you understand how this works. No advisor can provide any services or make recommendations that are right for you unless they’ve built a solid foundation of trust.