Some advisors are paid an annual salary. These advisors usually work for a bank, trust company or credit union. They provide advice about the products their financial institution offers, which limits what they can recommend to you.
Some advisors earn a sales commission every time they buy or sell an investment for you. If you buy a mutual fund, your advisor may also earn a trailing commission for as long as you own a mutual fund. This fee covers the cost of giving investment advice and providing other services to clients.
Fee-only advisors are paid directly by you. They don’t earn any commissions. They may charge a flat fee based on the services they provide to you, or they may charge you by the hour. Once you agree on the fees, you know what you’ll get and how much you’ll pay.
Fee-based advisors get paid through a combination of fees (paid by you) and commissions (paid by the firm they represent).