Compensation Models 


    Fee-Only Financial Adviser
    A “fee-only” financial adviser is compensated solely by the client, usually through a combination of hourly fees and asset management fees. Neither the adviser nor any related party receives compensation that is contingent upon the purchase or sale of financial products. A “fee-only” adviser must generally be registered as an investment adviser. Some believe that the fee-only compensation model reduces potential conflicts of interest which may be present when an adviser stands to gain financially from his recommendations to clients.   

    Fee-Based Financial Adviser
    A “fee-based” financial adviser is compensated by commissions that are contingent upon the purchase or sale of financial products and also by fees paid by the client. A fee-based or “hybrid” adviser must generally be registered as both an investment adviser and a registered representative of a broker-dealer.

    Commission-Only Financial Adviser
    A “commission-only” financial adviser is compensated by commissions, referral fees or other fees that are contingent upon the purchase or sale of financial products. The commissions or fees are either deducted from the client’s investment or rebated to the adviser by the firm that sold the product, thus the client pays no fees directly. A commission-only financial adviser must generally be registered as a registered representative of a broker-dealer.

    Commission Payments
    A CPA firm, or an individual CPA, who receives commissions or other transaction-based compensation related to securities transactions effected for clients generally must be registered as a broker-dealer or as a registered representative of a broker-dealer. According to the SEC, registration helps to ensure that persons with a “salesman’s stake” in a securities transaction operate in a manner consistent with customer protection standards governing broker-dealers and their associated persons.

    A CPA registered representative who earns a sales commission cannot remit that commission to an unregistered CPA firm or share the commission with an unregistered person. No CPA, other than one who is a registered representative of a broker-dealer, may receive commissions for securities transactions directly or indirectly through firm distributions. Additionally, to mitigate conflicts of interest, CPAs should disclose their commission arrangements to clients and potential clients.


    Structure and Implementation
    Registration and Compliance



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