How financial advice is structured (and why it matters for your money)
A clear look at how advisor compensation works—and how to find the right partner for your financial goals
Truthifi Editors
Published
Jun 23, 2025
3 min
How financial advice is structured (and why it matters for your money)
If you're thinking about working with a financial advisor, you might be asking some of these questions:
How are financial advisors compensated?
Are financial advisor fees tax deductible?
How much do Edward Jones financial advisors make (and those at other firms)?
And most importantly: how do I pick the right financial advisor for me?
Let’s pull back the curtain on the advisor business model—because understanding how your advisor earns money is the first step to building a stronger, more transparent relationship.
Are financial advisor fees worth it?
It’s one of the most important questions clients ask—especially in a world where more tools are available than ever before.
The answer depends on your goals, the complexity of your finances, and how involved you want to be. Many investors find that working with a financial advisor improves their financial confidence, adds discipline to their decision-making, and ultimately supports better long-term outcomes.
In short: the value of a good advisor often goes far beyond portfolio performance.
With Truthifi, you can see how your current advisor is performing and whether the value you’re receiving lines up with the fees you’re paying.
Why financial advisors matter more than ever
Before diving deeper into compensation, it's important to recognize just how valuable financial advisors can be to their clients' financial lives.
A great advisor does more than just manage your money—they help you align your investments with your values, reduce emotional decision-making, optimize your tax planning, and prepare for every life stage with greater confidence. Studies have shown that working with a financial advisor can improve not just portfolio returns, but also long-term behavior and outcomes.
Bottom line: A trusted advisor can be a powerful long-term partner in helping you build wealth and reach your goals.
Now let’s explore how the business works, and what that means for you as an investor.
How the financial advisor business works
The financial advice industry is broad, well-established, and designed to serve a wide range of client needs. Advisors help individuals plan for retirement, save for education, manage portfolios, navigate tax strategies, and more. To do all that effectively, the structure of how advisors earn compensation must also support long-term client relationships.
Let’s break it down—because once you understand the structure, you can navigate the system with confidence.
How are financial advisors compensated?
Financial advisors typically earn money in one (or more) of the following ways:
1. Fee-only advisors
These advisors charge you directly for their services. You might pay:
A flat annual fee
An hourly fee
A percentage of your assets under management (AUM), often around 1%
Fee-only advisors do not earn commissions for selling products, which helps minimize potential conflicts of interest.
2. Commission-based advisors
These advisors earn commissions when they sell financial products like mutual funds, insurance, or annuities. This model is common at some large firms and insurance companies.
While this can align with your goals, it's always a good idea to ask how the advisor is compensated for specific recommendations.
3. Hybrid (fee-based) advisors
Fee-based advisors combine both models: they charge fees for advice and may also earn commissions on some products. Many advisors at firms like Edward Jones, Merrill Lynch, Morgan Stanley, and Raymond James use this hybrid structure.
Tip: Always ask an advisor to clearly explain their compensation structure—reputable advisors welcome the transparency.
To see how this plays out in practice, check out how Truthifi tracks advisor compensation and value.
Are financial advisor fees tax deductible?
Here’s something a lot of investors wonder—but rarely ask directly.
Unfortunately, under the Tax Cuts and Jobs Act of 2017, most investment advisory fees are not tax deductible for individuals. These were once considered "miscellaneous itemized deductions," but are no longer allowed under current IRS rules through at least 2025.
That said, there are exceptions:
If you own a business and receive investment advice related to the business, fees may be deductible as a business expense.
If you're managing certain retirement plans, some administrative fees might be deductible within the plan.
For detailed advice, consult a qualified tax professional or review IRS Publication 529.
Still wondering how this impacts your real portfolio? Truthifi helps you see where your fees are going, and how they affect your outcomes.
How much do financial advisors make at Edward Jones, Merrill Lynch, Morgan Stanley, and Raymond James?
To see these compensation models in action, let’s look at some of the most well-known financial advisory firms in the U.S.—including Edward Jones, Merrill Lynch, Morgan Stanley, and Raymond James.
Compensation at these firms varies by experience and client base, but here’s a general breakdown:
New advisors: During the training period, advisors typically earn a base salary while building their practice.
Experienced advisors: Most of the compensation comes from commissions and asset-based fees. Earnings can range widely from $60,000 to $250,000+ depending on performance.
Firms like Edward Jones, Merrill, Morgan Stanley, and Raymond James also provide strong training, brand support, and tools that help advisors serve clients at scale.
How to pick a financial advisor
So now that you know how financial advisors get paid—what's the best way to choose the right one for you?
1. Start with your goals
Are you planning for retirement? Saving for education? Managing a sudden windfall? Different advisors specialize in different areas—and many of them offer insights through great portfolio websites or personalized investment tracking tools.
Not sure where to start? This Truthifi article on how to hire a financial advisor is a great primer.
2. Ask about credentials
Look for designations like CFP® (Certified Financial Planner), CFA (Chartered Financial Analyst), or CPA/PFS (Personal Financial Specialist).
3. Understand their compensation structure
As discussed above, make sure you’re clear on their fee structure. Transparent advisors will explain it clearly.
4. Read reviews and testimonials
Use platforms like FINRA BrokerCheck or NAPFA to research advisors.
Or better yet, use Truthifi’s advisor benchmarking tools to see how your current or potential advisor compares.
5. Use tools like Truthifi to assess advisor performance
Truthifi can help you track fees, measure portfolio performance, and benchmark your advisor's value. You can even bring a Truthifi Score into your review meetings to guide the conversation.
Where to learn more about advisor compensation
If you have questions about how a specific firm compensates its advisors, a great place to start is the firm's own website. Many firms publish detailed descriptions of their compensation models and account types.
You can also visit the FINRA BrokerCheck database to look up individual advisors and firms. This resource includes regulatory disclosures, employment history, and licensing details that can help you better understand how your advisor operates.
The more informed you are, the better your conversations will be—and the more confident you’ll feel about your choices.
Final thoughts: transparency builds trust
The financial advice industry is filled with committed professionals who genuinely want to help you succeed—whether that means planning for retirement, protecting your family, or making the most of your savings. By providing guidance on portfolio risk, retirement readiness, and how to protect investments, the best financial advisors help you navigate every stage of your journey with confidence, transparency, and fairness.
When you understand how advisors earn money, you can build a more open, informed, and productive relationship.
Want more confidence in the conversations you're having? This article on uncovering hidden financial pitfalls can help you ask the right questions.
And with tools like Truthifi, you can take that trust to the next level—with visibility, benchmarking, and confidence that you're on the right path.
Read next from the Truthifi Blog
How financial advice is structured (and why it matters for your money)
If you're thinking about working with a financial advisor, you might be asking some of these questions:
How are financial advisors compensated?
Are financial advisor fees tax deductible?
How much do Edward Jones financial advisors make (and those at other firms)?
And most importantly: how do I pick the right financial advisor for me?
Let’s pull back the curtain on the advisor business model—because understanding how your advisor earns money is the first step to building a stronger, more transparent relationship.
Are financial advisor fees worth it?
It’s one of the most important questions clients ask—especially in a world where more tools are available than ever before.
The answer depends on your goals, the complexity of your finances, and how involved you want to be. Many investors find that working with a financial advisor improves their financial confidence, adds discipline to their decision-making, and ultimately supports better long-term outcomes.
In short: the value of a good advisor often goes far beyond portfolio performance.
With Truthifi, you can see how your current advisor is performing and whether the value you’re receiving lines up with the fees you’re paying.
Why financial advisors matter more than ever
Before diving deeper into compensation, it's important to recognize just how valuable financial advisors can be to their clients' financial lives.
A great advisor does more than just manage your money—they help you align your investments with your values, reduce emotional decision-making, optimize your tax planning, and prepare for every life stage with greater confidence. Studies have shown that working with a financial advisor can improve not just portfolio returns, but also long-term behavior and outcomes.
Bottom line: A trusted advisor can be a powerful long-term partner in helping you build wealth and reach your goals.
Now let’s explore how the business works, and what that means for you as an investor.
How the financial advisor business works
The financial advice industry is broad, well-established, and designed to serve a wide range of client needs. Advisors help individuals plan for retirement, save for education, manage portfolios, navigate tax strategies, and more. To do all that effectively, the structure of how advisors earn compensation must also support long-term client relationships.
Let’s break it down—because once you understand the structure, you can navigate the system with confidence.
How are financial advisors compensated?
Financial advisors typically earn money in one (or more) of the following ways:
1. Fee-only advisors
These advisors charge you directly for their services. You might pay:
A flat annual fee
An hourly fee
A percentage of your assets under management (AUM), often around 1%
Fee-only advisors do not earn commissions for selling products, which helps minimize potential conflicts of interest.
2. Commission-based advisors
These advisors earn commissions when they sell financial products like mutual funds, insurance, or annuities. This model is common at some large firms and insurance companies.
While this can align with your goals, it's always a good idea to ask how the advisor is compensated for specific recommendations.
3. Hybrid (fee-based) advisors
Fee-based advisors combine both models: they charge fees for advice and may also earn commissions on some products. Many advisors at firms like Edward Jones, Merrill Lynch, Morgan Stanley, and Raymond James use this hybrid structure.
Tip: Always ask an advisor to clearly explain their compensation structure—reputable advisors welcome the transparency.
To see how this plays out in practice, check out how Truthifi tracks advisor compensation and value.
Are financial advisor fees tax deductible?
Here’s something a lot of investors wonder—but rarely ask directly.
Unfortunately, under the Tax Cuts and Jobs Act of 2017, most investment advisory fees are not tax deductible for individuals. These were once considered "miscellaneous itemized deductions," but are no longer allowed under current IRS rules through at least 2025.
That said, there are exceptions:
If you own a business and receive investment advice related to the business, fees may be deductible as a business expense.
If you're managing certain retirement plans, some administrative fees might be deductible within the plan.
For detailed advice, consult a qualified tax professional or review IRS Publication 529.
Still wondering how this impacts your real portfolio? Truthifi helps you see where your fees are going, and how they affect your outcomes.
How much do financial advisors make at Edward Jones, Merrill Lynch, Morgan Stanley, and Raymond James?
To see these compensation models in action, let’s look at some of the most well-known financial advisory firms in the U.S.—including Edward Jones, Merrill Lynch, Morgan Stanley, and Raymond James.
Compensation at these firms varies by experience and client base, but here’s a general breakdown:
New advisors: During the training period, advisors typically earn a base salary while building their practice.
Experienced advisors: Most of the compensation comes from commissions and asset-based fees. Earnings can range widely from $60,000 to $250,000+ depending on performance.
Firms like Edward Jones, Merrill, Morgan Stanley, and Raymond James also provide strong training, brand support, and tools that help advisors serve clients at scale.
How to pick a financial advisor
So now that you know how financial advisors get paid—what's the best way to choose the right one for you?
1. Start with your goals
Are you planning for retirement? Saving for education? Managing a sudden windfall? Different advisors specialize in different areas—and many of them offer insights through great portfolio websites or personalized investment tracking tools.
Not sure where to start? This Truthifi article on how to hire a financial advisor is a great primer.
2. Ask about credentials
Look for designations like CFP® (Certified Financial Planner), CFA (Chartered Financial Analyst), or CPA/PFS (Personal Financial Specialist).
3. Understand their compensation structure
As discussed above, make sure you’re clear on their fee structure. Transparent advisors will explain it clearly.
4. Read reviews and testimonials
Use platforms like FINRA BrokerCheck or NAPFA to research advisors.
Or better yet, use Truthifi’s advisor benchmarking tools to see how your current or potential advisor compares.
5. Use tools like Truthifi to assess advisor performance
Truthifi can help you track fees, measure portfolio performance, and benchmark your advisor's value. You can even bring a Truthifi Score into your review meetings to guide the conversation.
Where to learn more about advisor compensation
If you have questions about how a specific firm compensates its advisors, a great place to start is the firm's own website. Many firms publish detailed descriptions of their compensation models and account types.
You can also visit the FINRA BrokerCheck database to look up individual advisors and firms. This resource includes regulatory disclosures, employment history, and licensing details that can help you better understand how your advisor operates.
The more informed you are, the better your conversations will be—and the more confident you’ll feel about your choices.
Final thoughts: transparency builds trust
The financial advice industry is filled with committed professionals who genuinely want to help you succeed—whether that means planning for retirement, protecting your family, or making the most of your savings. By providing guidance on portfolio risk, retirement readiness, and how to protect investments, the best financial advisors help you navigate every stage of your journey with confidence, transparency, and fairness.
When you understand how advisors earn money, you can build a more open, informed, and productive relationship.
Want more confidence in the conversations you're having? This article on uncovering hidden financial pitfalls can help you ask the right questions.
And with tools like Truthifi, you can take that trust to the next level—with visibility, benchmarking, and confidence that you're on the right path.
Read next from the Truthifi Blog
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Always consult with a qualified financial advisor before making investment decisions.
Truthifi™ is the world’s first investment monitoring app. We're for investors who want clarity, advisors who want distinction, and an industry that needs trust.
Truthifi™ is the world’s first investment monitoring app. We're for investors who want clarity, advisors who want distinction, and an industry that needs trust.
Truthifi™ is the world’s first investment monitoring app. We're for investors who want clarity, advisors who want distinction, and an industry that needs trust.