How Do Financial Advisors Make Money?

how do financial advisors make money

A financial planner can help a small business reach financial goals. They can help put together a plan for emergencies. And a financial service expert can act as an investment consultant. Plus financial planning services can help with transferring business ownership.

Interested in becoming one? Remember they look after individual finances too. Read on to find out how financial advisors make money.

What is a Financial Advisor?

These experts use their expertise and knowledge to put together unique individual finance plans. Financial advice for investments and budgets and even mutual funds is included.

Here’s a few of the types:

Registered Investment Advisors

These people supply investment management to high end worth individuals. They have a legal responsibility to provide good investment advice. They need to register with the Securities and Exchange Commission. Or the state administrator.

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Fiduciary Advisors

This type of financial expert is bound to put their clients interests first.These professionals need to act to a higher standard than a financial advisor.

Personal Finance Advisors

This type of CFP looks after individuals. They are money planners that can help with items like stocks and bonds. Basically they help people manage their money.

There are also fee-only advisors and others that work on commissions. The fee percentage is generally 1%.

8 Ways a Financial Advisor Makes Money

Of course if you’re going to work in the financial industry, you’ll want to make money.

Here are 8 ways to do that.

1. Fee Only.

These experts receive all of their income from the fees that they charge to their clients. Advisor fees don’t include referral fees and/or commissions from third-party businesses.

2. Fee Based

These advisors get paid using a different fee structure. They charge a percentage of the assets. And they can take commissions.

3. Commission Based.

The management fee here comes from commissions generated through bonds and stocks as well as mutual funds.

4. Salaried

There are many financial advisors that are paid a salary from the firm they work for.

5. Through Performance Fees

Some wealth management experts put performance fees in their schedules. That allows them to make more money for going past set benchmarks

6. By Selling Products

Along with investing fees, some of these experts sell financial products like annuities and mutual funds. This type of world report is useful to understand trends.

7. Robo Advisors

These programs offer affordable advice using tech. Human financial advisors are preferred by some clients.

8. Budgeting Help

There are different ways that these professionals make their money. Helping individuals put together budgets is another route.

The right advisor can make money by becoming a registered investment advisor too. They get paid by working with larger account balances. And don’t forget in today’s digital world you can make your brand more reputable by providing finance-related content users can rely on.

How Much Money do Financial Advisors Make?

The average financial advisor salary in the United States is $74,779. Add $33,450 in commission to that. Of course the fee percentages vary by state. A law degree boosts your income by almost 80 percent.

Prudential is the top advisory firm in New York.

How to Get Started as a Financial Advisor

Do you want to get involved in financial planning? Here’s how you can get started with a reputable financial services company. Or set out on your own.

  • Start by getting a bachelors degree in any subject.
  • Think about an internship if you don’t have a lot of financial planning experience.
  • You’ll need licenses and certifications. If you’re selling investment products get Financial Industry Regulatory Authority (FINRA) credentials.

If you want to become a registered investment advisor, you need to register.

Legal Insights into Giving Financial Advice

An advisor recommends financial plans to their clients. Quite often the opinions expressed are legal. Here’s a few things you need to know.

  • Specific advice is held to a fiduciary standard. Financial planners giving investment advice need to register with the SEC.
  • You need to be a lawyer to give legal advice and charge clients for it. Financial planners can get in trouble when the two overlap.
  • The ways financial advisors work needs to tread lightly around tax planning too.

It doesn’t matter whether you are a fee-based advisor or one working with an insurance agent for a flat fee. Anyone working in the industry needs indemnity insurance. Consulting a lawyer will help you to understand your responsibilities.

How to Maximize Your Earnings as a Financial Advisor

Maximizing your earnings is in your best interests. Here’s how to bump up what most advisors receive.

  • Ask for a retainer fee. This can help you stay afloat during market downturns. Make sure you’re only asking for a reasonable fee here.
  • Sell insurance products. This is a good investment product to sell clients. Especially if you sell life insurance. Approaching an insurance company can work. Finances include this type of retirement planning.
  • Mange money. These fee based advisors steer clear from conflicts of interest. And ongoing management like this is profitable. There’s usually a performance and not hourly fee involved.
  • Set Up A Plan. You can set up a financial plan for a flat fee. Charge up between $2,500 to $3,500.

Financial advisors get paid from a client’s mutual fund too. Remember that fee only financial advisors get less than commission based ones. Consider a variable annuity if you’re going to sell investments.

Financial Advisor Costs to Consider

Any business has costs to consider. Here’s some that come with being a financial advisor. And some requirements for this industry.


CERTIFIED FINANCIAL PLANNER™ certification can cost up to $6,000.

Start Up Costs

Real estate can be number one here. Decide whether it’s in your best interest to rent or buy an office. You also need to consider utilities, payroll and other office expenses like furniture.

Business Model and Services

Deciding on your business model can affect your net worth. People looking for unbiased help usually go for the fee-based model. Keep in mind that a fee-only advisor earns less than one charging commissions.

Business Plan

A good business plan covers everything. From the fee percentage you’ll charge to the marketing you’ll do. These can cost between $5,000 and $20,000.

They help you get financing at first. And then act a signpost to gauge your progress in the financial services industry.

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Rob Starr Rob Starr is a staff writer for Small Business Trends. Rob is a freelance journalist and content strategist/manager with three decades of experience in both print and online writing. He currently works in New York City as a copywriter and all across North America for a variety of editing and writing enterprises.

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