How a financial adviser gets paid is one of the most important things to understand before you hire one. It's also one of the things the industry is most evasive about. The terminology is genuinely confusing - partly by accident, partly by design.
Here's a plain breakdown of the three models you'll come across in the UK, what each one means in practice, and which one we'd point you to.
The three payment models
| Model | Paid by | Conflict of interest |
|---|---|---|
| Fee-only | You, directly | Low |
| Fee-based | You + product commissions | Moderate |
| Commission-only | Product providers | High |
1. Fee-only
A fee-only adviser is paid only by you. Their income comes from the relationship with you, not from whether you end up buying any particular product.
There are three common ways they structure that:
- Flat fee: A set annual or one-off fee, often £1,500–£5,000+ depending on complexity
- Hourly: Typically £150–£350 per hour, useful for one-off planning questions
- Percentage of assets under management (AUM): Usually 0.5%–1% per year of the money they manage for you
The AUM model is technically fee-only, but worth a note: it scales with your wealth, which can mean you pay a lot more in absolute terms as your portfolio grows - even though the work might not have changed materially. For people with substantial assets, flat fees can be dramatically cheaper.
2. Fee-based
Fee-based advisers charge you a fee and also take commission from certain product providers - most often in insurance, protection products, and mortgages.
In the UK, the 2013 Retail Distribution Review largely banned commissions on investment products - but commissions still exist in adjacent areas. So if an adviser is recommending you a critical illness policy or arranging your mortgage alongside their investment advice, ask explicitly whether they're receiving commission for those parts of the relationship.
Fee-based isn't always a problem. But some of their income is tied to which products you end up buying, and you should know which products those are before you commit.
3. Commission-only
The adviser is paid entirely by product providers, usually as a percentage of the premium or contribution. You pay nothing directly. Sounds great - free advice - but there's an incentive problem.
If an adviser only gets paid when you buy a product, two things follow:
- They have a strong incentive to recommend that you buy something, even if doing nothing might be wiser
- They have an incentive to recommend whichever product pays the best commission, not necessarily what fits you best
Commission-only investment advice is now rare in the UK, but commission-only protection advice (life insurance, income protection) is still common. Be especially careful when an adviser presents themselves as offering "free" advice.
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Find your match →So which model should you choose?
For most people getting financial planning or investment advice, fee-only is the cleanest model. You know what you're paying, you know the adviser isn't being nudged by product incentives, and comparing costs across advisers is easier.
That said, the model matters less than the adviser. A fee-only adviser who gives lazy, generic advice is worse than a fee-based adviser who's thoughtful and clear about every penny that flows to them. The model is a strong signal. It's not a guarantee.
The questions to actually ask
Don't ask "are you fee-only?" - the term gets defined loosely. Ask these instead:
- "What are all the ways you might be paid in connection with my account?"
- "Do you receive any commission, kickback, or third-party payment from any product provider?"
- "If I take your advice and don't buy any product through you, how much do you earn from this relationship?"
The third question is the revealing one. If the answer is "nothing", you've learned something useful about their incentives.
How an adviser gets paid isn't the only thing that matters. But it's the cleanest predictor of whose interests they're structurally aligned with.
If you'd like to be matched with vetted UK advisers based on your specific situation, take our three-minute quiz. It's free, and every adviser in our network is FCA authorised, fully vetted, and offers a guaranteed one-hour discovery call. If fee-only specifically matters to you, mention it on the call.