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by Martin C. Seay, Ph.D., CFP®; Somer G. Anderson, CPA; Derek R. Lawson, CFP®; and Kyoung Tae Kim, Ph.D.

Executive Summary

  • This study examines how client characteristics differ between individuals who use commission-only, fee-only, and commission-and-fee financial planners.
  • Data from the 2015 National Financial Capability Study (NFCS) Investor Survey were used to explore client profiles, portfolio characteristics, adviser-use characteristics, and client perceptions.
  • Some client characteristics were related to the type of services provided by each compensation model. By understanding these profiles, financial planners can help focus their marketing material and skills toward the types of clients who are most likely to use their services.
  • The variation in client profiles is important to consider within the context of pending Department of Labor fiduciary requirements. Given identical standards of care, these profiles provide evidence that there are significant market demands for services of all compensation models.

Martin C. Seay, Ph.D., CFP®, is an associate professor of personal financial planning at Kansas State University. His research focuses on borrowing decisions, how psychological characteristics shape financial behavior, and methodology in financial planning research. He also serves as a board member for the Financial Planning Association and as a director for the Academy of Financial Services.

Somer G. Anderson, CPA, is a doctoral student in personal financial planning at Kansas State University and an assistant professor of accounting in the John E. Simon School of Business at Maryville University.

Derek R. Lawson, CFP®, is a doctoral student in personal financial planning at Kansas State University where he serves as a graduate research assistant. He is a financial planner at Priority Financial Partners and serves as the treasurer of the Financial Therapy Association. He has previously served as secretary for FPA NexGen, marketing coordinator for NAPFA Genesis, and director of NexGen for FPA of Greater Kansas City.

Kyoung Tae Kim, Ph.D., is an assistant professor in the department of consumer sciences at the University of Alabama. His research focuses on topics related to household economics, family finances, investment decisions, and financial literacy/education.

Although financial planning began as a commissioned-based field centered on the sale of products (Brandon and Welch 2009), it has evolved into a comprehensive planning experience with a variety of compensation models from which consumers can choose. The Certified Financial Planner Board of Standards (CFP Board) has provided financial planners with three compensation categories to report to consumers: (1) commission-only; (2) fee-only; and (3) combined commission-and-fee. Discussions continue about these compensation models, how services differ between these models, and how financial and psychological outcomes vary for clients. However, general observations and conjecture tend to drive these discussions rather than empirical research.

Understanding client preferences for adviser compensation models is particularly important within the context of the changing fiduciary landscape. The Department of Labor’s Conflict of Interest Rule, which partly phased in on June 9, 2017, and in late August received an 18-month delay on full implementation, will require all financial professionals who work with retirement plans (ERISA plans and IRAs) and/or provide retirement planning advice to act as a fiduciary when engaged in those services.1

Further, CFP Board has proposed changes to its Standards of Professional Conduct that would require all CFP® certificants to act as a fiduciary to their clients when providing financial advice. “Financial advice” is broadly defined as communication to a client that “would reasonably be viewed as a suggestion that the client take or refrain from taking a particular course of action with respect to” a multitude of financial planning areas including, but not limited to, development and/or implementation of a financial plan, investment advice and strategies, the selection of other financial professionals on behalf of the client, and anytime the CFP® professional has discretion of client assets.2 This is a significant departure from current rules, which indicate a CFP® professional must act as a fiduciary (i.e., in the best interest) to their clients when they provide financial planning or material elements of financial planning, which has allowed for loopholes (Kitces 2017).

Due to the scope of work that most CFP® professionals provide for their clients, a majority, if not all, of these professionals will inevitably engage in fiduciary work with their clients in addition to all financial advisers engaged in retirement planning activities. The shift to a fiduciary standard of care is particularly transformational for commission-based advisers who have traditionally operated within a suitability framework. From the consumer perspective, the leveling of commissions between products mitigates concerns about how adviser compensation might influence product choice. In many ways, this disentanglement levels the client-services playing field, making it more important to understand how clients differentiate between planners who use alternative models.

Consequently, the purpose of this paper is to examine how client profiles vary between commission-only, fee-only, and combined commission-and-fee financial planning compensation models.

Review of Compensation Models

Commission-based services are the longest-standing compensation model for financial planning services and continue to represent a significant share of the overall market (Brandon and Welch 2009; Lytton, Grable, and Klock 2012; Pirker and Schmitt 2016). In these practices, adviser compensation—and the amount consumers pay—is directly tied to the choice of service or product recommended to and used by the consumer. Common products and services that exist within this space include investment product sales, real estate, and insurance products such as life insurance (whole or term), long-term care insurance, disability insurance, health care insurance, and annuities (variable or fixed).

Although the National Association of Personal Financial Advisors (NAPFA) was established in 1983 as a membership organization for financial planners who wanted to offer a fee-only model of financial planning, it wasn’t until the early 2000s that fee-only models gained national prominence through the growth of the assets under management (AUM) model (Kitces 2015). Currently, the largest and most profitable registered investment adviser (RIA) firms primarily use the AUM model (Kitces 2016).3

Beyond AUM, the use of retainer fees, hourly planning fees, and project-based planning has grown significantly. A number of organizations support these alternative fee-only models. The Alliance of Comprehensive Planners requires members to be fee-only and provide a retainer model; the Garrett Planning Network requires members to be fee-only and be paid hourly; and the XY Planning Network requires members to offer their clients a monthly retainer option.4,5 NAPFA has grown to encompass all of these fee models, but earning a commission is strictly prohibited.6

A financial planner can work as a commission-and-fee financial planner in a variety of ways. One common way is the dual-registered model, where a financial planner earns fees through their broker-dealer’s RIA and earns a commission via product sales on behalf of the broker-dealer. Another common model is the hybrid financial planner who earns fees as an independent RIA, but also can earn a commission on product sales for a broker-dealer. The difference between the two is that the broker-dealer and the RIA are distinctly separate for the hybrid, while the dual-registered planner operates under what is essentially one company (Roberts 2016).

Although these planners earn commissions, many receive the majority of their income from fees, with many clients not paying a commission at all. For example, the primary mode of compensation could be in the form of fees through AUM, but these planners could retain legacy clients that pay trailing commissions or engage in their own insurance transactions as needed.

Characteristics of Those Who Pay for Advice

The use of financial planners in the United States in not widespread, but it is steadily growing. Twenty-nine percent of U.S. households reported using a financial planner in 2013 (Seay, Kim, and Heckman 2016), up from 21 percent in 1998 (Hanna 2011).

Previous research has sought to understand which households seek financial planning services and why. Bae and Sandager (1997) found that consumers were primarily interested in using a financial planner for retirement planning, investment management, and tax planning. Bae and Sandager (1997) also found that the primary reasons individuals sought a financial planner were a lack of personal financial knowledge and a desire for the personal assurance and confidence that professionals offer. Honesty, competence, objectivity, the ability to communicate, and confidentiality were found to be very important to clients in selecting a planner; whereas reliability, access to the adviser, courtesy, and compensation transparency were relatively less important. Competence and certification were identified as critical, as more highly educated financial planners were more sought after, and 92 percent of clients reported that having an adviser with the CFP® designation was important to them.

Individuals who sought financial help from a professional adviser have also been found to have higher levels of income (Hanna 2011), wealth and educational attainment (Finke, Huston, and Winchester 2011; Hanna 2011; Lachance and Tang 2012), financial risk tolerance (Grable and Joo 2001; Hanna 2011; Joo and Grable 2001; Robb, Babiarz, and Woodyard 2012), and financial satisfaction (Grable and Joo 2001).

Those who use the services of professional advisers have also been shown to exhibit more positive financial behaviors, such as eliminating credit card debt or regularly saving (Grable and Joo 2001; Joo and Grable 2001) and to be older (Finke et al. 2011; Grable and Joo 2001) than their counterparts.

Joo and Grable (2001) showed that women and individuals with more proactive attitudes were likely to seek help for their retirement planning. Similarly, Finke et al. (2011) found that individuals with lower levels of subjective financial knowledge were most likely to pay for financial advice and, of those who paid for advice, clients with higher subjective financial knowledge were more likely to work with a comprehensive financial planner, a result also supported by Seay et al. (2016).

Furthermore, objective financial knowledge, specifically understanding diversification and mortgage questions, was positively associated with the use of a financial planner (Seay et al. 2016). Lastly, an individual’s willingness to trust has been recognized as a positive predictor in financial help-seeking (Lachance and Tang 2012; Martin, Finke, and Gibson 2014).

Previous research provides a basis for understanding who seeks financial planning services and the services that they seek. However, more research is needed to understand how clients choose between compensation models. Consequently, this study explored how client profiles, portfolio characteristics, adviser-use characteristics, and client perceptions related to the use of a financial professional differed between clients who paid commission-only, fee-only, or both commission and fees for financial advice.


Dataset and sample selection. This study used data from the 2015 National Financial Capability Study (NFCS) Investor Survey. This survey was administered by FINRA in July 2015 to 2,000 individuals who indicated ownership of non-retirement investments. It’s a part of a broader effort by the FINRA Investor Education Foundation, which, in consultation with the Treasury Department, commissioned the first NFCS in 2009 to explore the financial capability of U.S. households and investigate differences associated with demographic, attitude, behavior, and financial literacy characteristics. From the original 2,000 respondents, the sample used here was limited to 722 respondents who indicated having a specific broker or investment adviser and indicated knowing how their adviser was paid. Although this is a unique sample to investigate client characteristics, it should be noted that sample design was not constructed in a way to ensure overall client population representativeness.

Analysis. Compensation model definitions were based on the following question in the 2015 NFCS Investor Survey: “Which of the following types of fees do you pay for your non-retirement investment accounts?” The response choices were: (1) a commission on trades; (2) a percent of the total value of assets managed; and (3) a fixed monthly or annual fee. No information was collected on hourly planning fees.

For this analysis, the three responses were split into the following compensation categories: (a) commission-only (n = 169) if they responded with option 1 only; (b) fee-only (n = 345) if they did not select option 1 but selected option 2 and/or 3; or (c) commission-and-fee7 (n = 208) if they chose any combination of option 1 and options 2 and/or 3. Chi-square tests of independence and means testing were performed to explore differences between clients using the three compensation structures. The commission-only model was used as a reference group for testing for ease of interpretation.

Measurements and Results

Client profile. Characteristics of the sample can be found in Table 1. The majority of the respondents were white (84 percent), male (57 percent), married (71 percent), age 55 or older (60 percent), and had at least some college education (93 percent). Most respondents were either employed full-time (40 percent) or retired (35 percent) and reported a household income of $50,000 or more (85 percent).


Some significant demographic and socioeconomic differences were noted between compensation models. Commission-only clients were significantly older, less racially diverse, more likely to be retired, and had less household income than the commission-and-fee clients.

The 2015 NFCS asked five financial knowledge questions related to the fundamental concepts of personal finance drawn from a five-question scale created by Lusardi and Mitchell (2009, 2011). The majority of respondents correctly answered questions related to mortgages (92 percent), compound interest (91 percent), inflation (84 percent), diversification (82 percent), and bonds (59 percent). However, commission-only clients had a significantly better understanding of inflation than commission-and-fee or fee-only clients. Similarly, commission-only clients had a significantly better understanding of diversification than commission-and-fee clients.

Information was also available related to self-assessed attitudes and knowledge, specifically related to investment decisions. Respondents indicated relatively high subjective investment knowledge (M = 4.98 out of 7) and risk tolerance (M = 6.27 out of 10). Differences in compensation model were noted; fee-only clients had significantly lower self-assessed investment knowledge than those paying commission only. Commission-and-fee clients reported significantly greater risk tolerance than commission-only clients.

Portfolio characteristics. A summary of the sample’s non-retirement asset portfolio characteristics is presented in Table 2. Most respondents reported a total non-retirement account value of less than $500,000 (72 percent). A high percentage reported owning individual stocks (76 percent) and mutual funds (82 percent), whereas less than half owned individual bonds (44 percent), annuities (43 percent), ETFs (26 percent), commodities or futures (11 percent), or other investments (16 percent).


In terms of diversification, 62 percent of respondents reported that more than half of their non-retirement asset portfolios was in stocks. Related to life insurance, roughly half of the respondents owned a whole life insurance policy (47 percent). Variations in asset holdings were detected between compensation models; commission-only clients were more likely to own individual stocks than those paying fee only, while those paying fee only were more likely to own annuities and whole life insurance than clients paying commission only. Commission-and-fee clients were more likely to own individual bonds, mutual funds, ETFs, annuities, whole life, and commodities or futures than those paying commission only.

The following question was asked related to account activity: “In the past 12 months, how many times have you bought or sold investments in non-retirement accounts?” Most respondents reported having made between zero and three transactions in their accounts in the past 12 months (57 percent). Commission-and-fee clients were significantly more likely to have made more than 10 transactions than commission-only clients, while commission-only clients were significantly more likely to have made between four and 10 transactions than fee-only clients.

Adviser-use characteristics. A summary of adviser-use characteristics can be found in Table 3. Respondents were asked questions related to how they delegate decisions with their financial adviser, how often they have communicated with them, and if they have met face to face. Three-quarters of respondents reported using their adviser/broker to help with some decisions, while 25 percent relied on their adviser/broker for all decisions.


Fee-only clients were more likely to use their adviser/broker for all decisions than commission-only clients. Half of the respondents reported communicating with their adviser or broker between zero and three times within the last 12 months. Of those respondents, 6 percent reported having no meetings at all with their adviser or broker in the last year. Seventy-two percent of respondents reported having met face to face with their adviser in the last 12 months. There were no significant differences in the number of times communicated or in face-to-face meetings between compensation groups.

Respondents were asked to assess the importance of each of the following reasons for using a financial adviser: to free up their time, to help avoid losses, to improve investment performance, to learn about investment opportunities, and to have access to investments they couldn’t get on their own. Seventy-nine percent of respondents reported that it was very important to use an adviser to avoid losses. Eighty-three percent found it very important to use advisers to improve investment performance, and 66 percent found it very important to use an adviser to learn about investment opportunities. Although 71 percent of respondents reported that it was not important or only somewhat important to use an adviser to free up time, clients paying commission only were significantly less likely to find this aspect very important than fee-only or commission-and-fee clients.

Survey respondents were also asked about performance of background or registration checks. Seventy-one percent of respondents reported that they had not completed a background or registration check. Commission-and-fee clients were significantly more likely to have performed this check than commission-only clients, but no differences were noted between commission-only and fee-only clients.

Finally, respondents were asked to assess their agreement with the statement: “I set long-term goals and strive to achieve them.” Respondents rated themselves highly on this attribute (M = 6.03 out of 7), and there were no significant differences noted between compensation groups.

Client perceptions. Sample characteristics related to client perceptions are provided in Table 4. The following questions related to financial adviser compensation were assessed on a 10-point Likert-type scale: “How clear of an understanding do you have of how your broker or investment adviser gets compensated?” “How clear of an understanding do you have of the fees you pay for your non-retirement investment accounts?” And, “How important to you were the fees and pricing structure when opening your non-retirement investment accounts?”


Respondents indicated they had a clear understanding of both their adviser’s compensation (M = 8.18 out of 10) and of fees related to their non-retirement accounts (M = 8.26 out of 10). Respondents also ranked fees related to their non-retirement accounts as being very important (M = 8.05 out of 10). No significant differences were noted between compensation groups.

The respondents’ assessments of the reasonableness of adviser fees was captured on a seven-point Likert-type scale with the question: “How strongly do you agree or disagree with the following statement: The fees I pay for my non-retirement investment accounts are reasonable.” Respondents felt that fees paid were reasonable (M = 5.51 out of 7), but commission-based clients (M = 5.66, SD = 1.22) felt their fees were more reasonable than commission-and-fee clients (M = 5.40, SD = 1.22).

The following question was asked to measure the respondents’ attitudes toward sales-based compensation structures: “How much do you think each of the following would affect the advice that a financial adviser gives to you: he/she receives a commission based on trading activity; his/her firm pays an incentive for selling certain investments; and he/she receives compensation from third parties to sell their investment products.”

Respondents overwhelmingly felt that adviser compensation based on sales factors somewhat or greatly impacted the advice received. Seventy-seven percent agreed that commission based on trading activity impacted the advice received; 87 percent believed that incentives based on selling certain investments impacted the advice received; and 87 percent agreed that compensation from third parties for selling their investments impacted the advice received.

Fee-only clients were significantly more likely to report that advice received would be impacted a great deal if the adviser earned commission on trading activity than clients paying commission only. Commission-only clients were significantly more likely to report that such a commission structure would not affect advice received at all, compared to both commission-and-fee and fee-only clients. There were no significant differences for the questions related to selling incentives and third-party compensation.

Respondents felt confident that U.S. financial markets offered good long-term investment opportunities (M = 7.25 out of 10) and that U.S. financial markets were fair to all investors (M = 5.80 out of 10).

Commission-and-fee clients were significantly more confident than commission-only clients in terms of both opportunities and fairness. Respondents were similarly optimistic about the future of the stock market, with the majority (55 percent) estimating average annual S&P 500 returns between 5 percent and 9.9 percent over the next 10 years, and 97 percent expecting their portfolios to perform the same as (67 percent) or better than (31 percent) the market over the next 12 months. However, commission-only clients were significantly more likely to expect worse-than-market portfolio performances over the next 12 months than commission-and-fee clients. Conversely, commission-only clients were significantly more likely to expect a 20 percent or more return over the next 10 years than fee-only clients. Commission-and-fee clients were significantly more likely to expect 10-year returns between 10 percent and 14.9 percent than commission-only clients. Most respondents felt comfortable making investment decisions (M = 7.20 out of 10), but fee-only clients were less comfortable with making investment decisions than those paying commission only.

Respondents were asked about the importance of a professional designation with the following question: “If you were looking for a financial adviser, how important would the person’s professional designations or certifications be in your decision to work with that person?” Fee-only clients were more likely than commission-only clients to find professional designations or certifications very important.

Finally, respondents were asked to assess their agreement with the statements: “I am worried about being victimized by fraud,” and “I worry about running out of money in retirement.” Respondents were somewhat worried about being victimized by fraud (M= 3.66 out of 7), but commission-and-fee clients were significantly more worried about fraud than commission-only clients. Respondents were also somewhat worried about having enough money in retirement (M = 3.94 out of 7), but there were no significant differences noted between compensation groups.


The purpose of this study was to examine how client characteristics—specifically client profiles, portfolio characteristics, adviser-use characteristics, and client perceptions related to the use of a financial professional—differ between individuals who use a commission-only, fee-only, and commission-and-fee financial planner.

Overall, the majority of financial planning clients are white, married men over the age of 55 who have at least some college education and are either working full-time or retired. Clients generally have high objective financial knowledge (but bonds are less understood), yet they perceive themselves to be moderately knowledgeable about investments. In support of Hanna (2011), the overall sample of clients working with a financial adviser appear to have an above-average risk tolerance. Results show that clients working with a financial adviser tend to have low trading activity in their accounts (three or less transactions per year). The majority of client portfolios were more than 50 percent stock, and were likely to include individual stocks and mutual funds. ETFs, commodities, futures, and other investments were owned less frequently.

With respect to adviser use, clients indicate that they mostly use financial advisers to help make some decisions, rather than have the adviser make all financial decisions. Additionally, clients work with an adviser to free up time, avoid losses, improve investment performance, learn about investment opportunities, and gain access to investments they might otherwise not have.

It is slightly concerning that the majority of clients indicate working with a financial adviser to avoid losses, as the risk of loss is inherent in investing. Financial advisers should take care to clearly communicate that investment risk is always present, and that clients will likely experience losses in the short run at some point. However, the advisers can help clients minimize losses through diversification and assist clients with managing emotions related to investing. Financial planning clients are likely to set long-term financial planning goals, and many clients met face-to-face with their adviser within the past year, but a majority only communicated with their adviser zero to three times over the last year.

In terms of client perceptions, financial planning clients expected the S&P 500 to have an average return of 5 percent to 10 percent over the next 10 years, and they expected portfolio returns to be consistent with the market over the next year (when they completed the survey in 2015). These individuals are comfortable with investment decision-making and are confident in the U.S. financial markets.

Professional designations appear to be important to clients working with a financial adviser, and most clients perceive commissions on trading, selling incentives, and third-party compensation to impact the advice they receive. Finally, clients indicate that they understand how they pay their financial adviser, how fees are paid for their non-retirement accounts, and the importance of fees when opening a non-retirement account.

Commission-Only Clients

The commission-only model of financial planning was used by the least number of clients, and it tended to be used by older clients, especially those age 65 and older. This pattern aligns with the overall trend in financial planning compensation, as commission-only models were prominent when the current cohort of 65-plus-year-old clients were in the heart of their careers.

Clients of commission-only financial advisers tend to be financially knowledgeable, confident in their financial knowledge, and comfortable with investment decision-making. These clients are also more likely to be retired, and do not generally use an adviser to free up time. This may indicate that commission services are more attractive to individuals who have time to devote to their financials and are more focused on using advisers for product implementation.

Although commission-only clients had the least amount of risk tolerance, they cared the least about a professional designation, were less concerned about fraud, and were less prone to believe that commission on trading activity affects the advice received. These clients also believed the fees they pay are reasonable.

Finally, a greater percentage of commission-only clients earned less than $50,000 per year as compared to the other models. This could indicate that perhaps commission-only financial advisers are, or are perceived to be, less expensive than other advisers. It could also indicate that clients with less income may not need, or perceive the need for, more comprehensive financial planning services.

This profile indicates commission-only advisers should focus on clients who are seeking a partner and facilitator, rather than someone to whom they can completely delegate. Marketing that highlights the adviser in a “partner” role could be particularly appealing to this clientele. Similarly, these clients appear to be relatively knowledgeable and confident in their knowledge, and have limited concern about how compensation may relate to the advice received. Consequently, creating advanced content, action-like items, and/or how-to guides on how to implement different strategies may be particularly appealing.

Finally, financial advisers working under this compensation model appear to have a marketing opportunity to engage younger, working clients, by highlighting their ability to partner with clients for the long haul to help them achieve financial success during each stage of life.

Commission-and-Fee Clients

Commission-and-fee clients tended to be younger, more racially diverse, and the most likely to be working full-time, as well as the least likely to be retired. These clients are relatively optimistic about the U.S. markets and have the most tolerance for risk, which might be why they tend to believe the S&P 500 will produce higher returns. They are also most likely to perform an adviser background check, which corresponds to results indicating clients of commission-and-fee financial advisers are most concerned about fraud.

These clients reported the highest trading account activity of all clients working with a financial adviser. Specifically, these clients were most likely to report having 10 or more account transaction within a 12-month period when compared to commission-only clients. Commission-and-fee clients believe the fees they pay are reasonable, but their reported scores were relatively lower.

In terms of financial knowledge, commission-and-fee clients have the lowest level of objective financial knowledge, but also scored the highest in subjective financial knowledge. This indicates the presence of overconfidence, and that they perceive themselves to know more about investments than they do. However, these clients were the most comfortable with investment decision-making, likely because they were the most confident in the financial markets. In terms of reasons for using an adviser, commission-and-fee clients were more likely to use a financial adviser to free up time for themselves than commission-only clients.

Overall, commission-and-fee clients were more diligent in their selection of their adviser, used their advisers to free up time, and were relatively sensitive to overall adviser cost. There was significant concern about overconfidence, as these clients had relatively low measured financial knowledge but were more confident in both their investment knowledge and overall financial knowledge. Additionally, these clients had the highest observed level of risk tolerance. When paired with their relatively optimistic expectations about market returns, advisers working with these clients must be sure to carefully align financial decisions with overall portfolio goals and time horizons and to check any irrational exuberance.

Fee-Only Clients

The fee-only model was the largest group of financial advisers used by clients, corresponding with the increasing number of fee-only financial advisers. Fee-only clients had relatively high income, which may indicate that they can afford to pay for comprehensive services. In contrast to the relatively overconfident commission-and-fee clients, fee-only clients scored high in financial knowledge but reported being the least confident and knowledgeable about investments. Moreover, fee-only clients preferred advisers with a professional designation, seemed to delegate more to their adviser, and reported they want a financial adviser to help them free up time.

Fee-only clients appeared to have more defined beliefs around compensation, as they were more likely to indicate that commissions would greatly affect the advice received. This may explain why fee-only clients had fewer transactions in their accounts than clients of other financial advisers. An interesting find is that clients of fee-only advisers were more likely to own whole life insurance and annuities, which are commonly paid for with commissions. This relatively high ownership rate could be due to the relatively high income nature of the group.

This creates an interesting profile for fee-only planners, as their clients are relatively under-confident in their abilities and compensate by actively seeking to offload responsibility and decision-making to their planners. This profile indicates the desire for more comprehensive and inclusive services, but also comes with a careful eye toward any perceived outside influence on advice and a focus on professional designations.


The current study has a number of limitations. Foremost, only descriptive information of current clients of brokers and financial advisers was provided. Analyses were not conducted in a manner to establish a clear predictive link between certain characteristics and adviser choice. While important for future research, it would have limited the amount and type of information—specifically related to behaviors associated with each compensation type—which could have been addressed in this paper.

Second, this study relied upon self-reported data regarding the use of a financial adviser and their compensation model. It is possible that clients are confused or misinformed about their adviser’s compensation model, potentially clouding the analyses. This is particularly true related to commission compensation, as previous research indicated this compensation was less tangible to clients (Inderst 2015; Inderst and Ottaviani 2012).

Additionally, no information was available about advisers who used hourly fees. This is important given that many financial advisers, particularly those who are part of an RIA, offer hourly fees as one form of compensation model. Clients who choose this type of arrangement could have significantly different characteristics than what was found in this study.

Lastly, this analysis was limited to 722 clients who held non-retirement investments. Although many, if not most, clients of financial advisers have investment assets beyond their retirement plans and IRAs, this does limit the type of client that is analyzed and may not be generalizable to the full client population.


Using data from the FINRA-sponsored 2015 NFCS Investor Survey, this study provided insight into client profiles of 722 clients of brokers and financial advisers. These profiles shed light on how client characteristics differ based upon the compensation model of their adviser.

The noted variation in client profiles is especially important to consider within the context of the pending implementation of the Department of Labor Conflict of Interest Rule and the recently proposed changes to CFP Board’s Standards of Professional Conduct. Given identical standards of care to clients, these profiles provide evidence that there are significant market demands for services of all compensation models and highlight the benefit of variation in market services from advisers.

Although there were similarities among clients, some characteristics were related to the type of services provided by each compensation model. Evidence was provided that there are some rational decisions being made by clients to align their needs and preferences with their adviser’s compensation model. By understanding these profiles, financial advisers can help focus their marketing material and skills toward the types of clients who are most likely to use them given their compensation model and the services they provide.


  1. See the Federal Register, Vol. 82, No. 66 posted April 7, 2017 at
  2. See “Proposed Revisions to CFP Board’s Standards of Professional Conduct” at
  3. See also “The 2015 FA Insight Study of Advisory Firms: People and Pay” at; and “2015 InvestmentNews Adviser Compensation and Staffing Study” at
  4. Member firms have to be fee-only, and can offer other fee options such as flat-fee, hourly, and/or AUM, but retainer must be offered.
  5. Up until a few years ago, a financial planner could be a NAPFA member and receive commissions so long as these commissions were received from a financial services firm in which they had 2 percent or less ownership (Clark 2014).
  6. Determined by clients who indicated that they paid a commission and paid either a percent of total value of assets managed and/or a fixed monthly or annual fee.


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