When Canadians search for financial planning support, one of the most important questions to consider is: how is the financial planner compensated?
In Canada, the terms fee-based, fee-only, and fee-for-service are often used, but unlike in the United States, there is no single national standard defining them. Different regulators, firms, and professionals may use these terms in slightly different ways.
That lack of consistency can make it difficult to compare options. Here’s what each term generally means in the Canadian context:
What Does Fee-Based Financial Planning Mean in Canada?
A fee-based planner charges client fees but may also receive other forms of compensation. This model is common in Canadian financial services because many planners are licensed to sell both investments and insurance. Compensation can include:
- Assets under management (AUM) fees – a percentage of the client’s investment portfolio.
- Hourly or engagement fees – charges for specific planning work.
- Commissions – paid when certain products, such as mutual funds or insurance, are sold.
- Trailing or referral fees – ongoing payments linked to products or client referrals.
Because compensation can come from multiple sources, it’s important for clients to ask for full disclosure of both fees and commissions.
What Is a Fee-Only Financial Planner in Canada?
A fee-only planner is compensated exclusively by the client. No commissions, trailing fees, or third-party payments are received. Typical structures include:
- Hourly billing – paying by the hour for advice.
- Project-based or engagement fees – paying a flat amount for a financial plan or strategy.
- Assets under management fees – paying a percentage of the portfolio, but with no additional commission-based compensation.
Fee-only is often associated with a high level of transparency because all payments flow directly from the client to the planner. However, it is less common in Canada than in some other countries.
What Is the Fee-for-Service Model in Financial Planning?
The fee-for-service model in Canada usually refers to time-based or project-based billing only, without portfolio-based fees. Examples include:
- A fixed fee for a comprehensive financial plan.
- An hourly rate for retirement or tax planning advice.
- A one-time engagement for a second opinion or estate review.
This model is often used by planners who focus solely on financial planning and do not manage investments or sell insurance.
What Canadians Should Know About Financial Planning Fees
In Canada, fee-based, fee-only, and fee-for-service each describe different ways planners are compensated—but the definitions aren’t always consistent across the industry. The most reliable way to understand how a planner works is to ask directly about their fee structure, confirm whether commissions are involved, and request a written explanation.
Clear compensation builds transparency, and transparency builds trust—both of which are essential in any financial planning relationship.
Disclaimer: This article is for general educational purposes only and does not constitute financial, tax, legal, or insurance advice. Each individual’s situation is unique. Please consult with your CPA and qualified financial professionals before making decisions about financial planning or advisor compensation models.
Related Posts
