How do financial advisers get paid?
How an adviser is paid depends on the type of advice. Pension and investment advice works differently from some mortgage and insurance advice.
Understand financial advice costs →
Direct advice fees
For new retail investment advice, including advice on relevant pension products, advisers generally charge an agreed fee rather than receiving provider commission. Fees can be fixed, hourly, percentage-based or a combination. Historic arrangements and other types of financial product can involve different rules.
When can commission apply?
MoneyHelper explains that advisers or brokers can receive commission from providers for certain products such as mortgages and insurance. The adviser should explain how the advice is paid for before you commit.
Fees can sometimes be paid through a product
In some arrangements the advice fee can be deducted from or added to the financial product rather than paid separately. That does not make the advice free, so understand the overall cost.
What should you ask?
Follow the money through the service
Start with the legal firm that contracts with you, then identify the payments linked to its work. There may be an initial planning charge, a charge for putting a recommendation into effect and a recurring advice charge. Some firms combine stages; others quote them separately.
Ask whether the person you meet is an employee, partner or business owner, but do not assume you need their private salary details to understand your own bill. The material issue is the firm's remuneration, the service promised and any commercial relationship that may affect the engagement.
Adviser charges may be paid directly or deducted through a provider with your agreement. Check statements so you can see the amount and frequency. A fee does not disappear because it is taken from an investment instead of a current account.
Compare incentives without assuming a single model is perfect
An asset-based fee can rise as the chargeable balance rises; an hourly model depends on time; a fixed fee depends on the agreed scope. Each requires a clear explanation. Ask how the firm handles recommendations that reduce the assets it manages, such as using money for another purpose, without assuming what recommendation should be made.
In a fictional example, 0.75% of £300,000 is £2,250 a year before other charges. If the chargeable balance becomes £200,000, the simple percentage calculation becomes £1,500, unless a minimum or other term applies. The financial incentive is visible, but the correct planning decision still depends on the circumstances.
Where other professional services are introduced, ask whether referral payments or ownership connections exist. Transparent disclosure gives you context; it does not replace comparing the quality and suitability of the work.
Connect each payment with a deliverable
Write down what happens for the initial fee, what happens every year and what triggers an extra charge. Find out what is payable if you decline implementation or the recommendation is to retain existing arrangements.
Ask how you can stop a recurring service and which charges would remain afterwards. Underlying investment or platform costs may continue even when advice ends. If a service is described as free, identify which part is free and how any later work is paid for.
The aim is to understand your agreement, not to infer quality from the charging model alone. You should be able to explain the cash cost, the work and the continuing commitments before accepting the proposal.
