In contrast, a commission-based advisor’s income is earned entirely on the products they sell or the accounts that are opened. Products for commission-based advisors include financial instruments, such as insurance packages and mutual funds. The more transactions they complete, or the more accounts they open, the more they get paid.

Commission-based advisors can be fiduciaries, but they don’t have to be. The laws state they must follow the suitability rule for their clients, which means they can sell any products they believe suit their clients’ objectives and situation—although the yardstick for suitability is a fairly subjective one. They do not have a legal duty to their clients; instead, they have a duty to their employing brokers or dealers. Further, they do not have to disclose conflicts of interest, which can occur when the client’s interests clash with those who are compensating the advisor.