Three Questions to Ask a Financial Advisor About Fees, Incentives, and Conflicts of Interest

A straightforward way to uncover how your advisor really gets paid—and whether those incentives shape the advice you receive.

“If you don’t know how an advisor is paid, you don’t know why they’re recommending what they recommend." - Paul Powell

Every dollar a financial advisor or firm earns ultimately comes from one place: the investor. And every dollar you pay—whether it’s an advisory fee, an internal fund expense, a commission, a product override, or a firm-level bonus—directly reduces your net return. Fees create drag. And drag compounds.

But the dollar impact is only half the picture.

Incentives influence something even more important: the recommendations you receive. A commission-laden product, a preferred fund list, a firm-wide sales goal—these aren’t theoretical. They shape advisor behavior every single day.

And one point cannot be softened:

If an advisor receives a commission for a recommendation, they are not acting as a fiduciary at that moment.

They are acting as a salesperson. That doesn’t make the product automatically wrong—it simply shifts the burden onto you to determine whether the advice aligns with your best interest.

Fee clarity isn’t skepticism.

It’s self-defense.

These three questions—directly from Financial Self-Defense: 27 Questions Every Investor Must Ask Before Hiring a Financial Advisor—give you the clarity most investors never receive.

1. “Will you disclose all compensation you receive from any recommendation—in writing—at the time you make the recommendation?”

Most investors believe they know what they’re paying.
In reality, the advisory fee is often just the visible part of the total cost.

Advisors or firms may receive additional compensation through internal fund expenses, product commissions, revenue-sharing arrangements, product overrides, bonuses tied to sales thresholds, or incentives for directing assets into preferred funds or platforms. Fund companies may even provide marketing support that subtly shapes what gets recommended.

None of these are inherently wrong.
But they all shape incentives.
And they should be disclosed.

A strong advisor will be able to provide a written breakdown for every recommendation they make—what they earn, how they earn it, and why the recommendation still aligns with your goals. A weak advisor will talk in generalities or simply reassure you that “your fee covers everything.”

Reassurance isn’t alignment.
Documentation is.

2. “Do you receive any commissions, bonuses, or product overrides if I use certain investments or solutions?”

Commissions haven’t vanished from financial advice.
They’ve simply become less visible.

Annuities, life insurance, structured notes, certain alternatives, proprietary funds, and preferred solutions often pay advisors more than other products. Even fee-based advisors may work within firms that offer bonuses or incentives tied to specific product categories or sales levels.

This question is not confrontational.
It is necessary.

A confident advisor will answer directly and explain which products trigger additional compensation and how those incentives are managed. Someone who avoids the question—or dismisses the importance of incentives altogether—reveals more in their discomfort than they do in their words.

Transparency about incentives is the only way to evaluate whether advice is truly objective.

3. “Can you report my total annual cost each year—in dollars—including your fees, fund expenses, and any compensation you receive?”

Most investors see only the advisory fee.

The rest is scattered: internal fund expenses quietly deducted through investment returns, commissions embedded in product recommendations, firm-level payments tied to distribution agreements, and year-end incentives no client ever sees.

A complete annual cost summary brings all of it into one number:
what you paid, in total, for the advice and decisions made on your behalf.

Some advisors will argue that “returns are net of fees,” as though that settles the matter. It doesn’t. You must overcome every dollar of cost before earning a dollar of net return. And when total costs reach 1.5% to 2%, you’re giving up a meaningful portion of the market’s long-term average return.

A strong advisor will provide this number annually without hesitation.
A weak advisor either cannot produce it—or does not want to.

Either way, that’s your answer.

What These Questions Reveal

These questions are designed for clarity, not confrontation.
They reveal:

• how your advisor earns money

• when incentives influence recommendations

• what your relationship actually costs

• whether your advisor embraces transparency or avoids it

• whether the advice you’re getting is fiduciary or sales-driven

You don’t need technical knowledge to protect yourself.
You just need to insist on the information that matters.

The full Financial Self-Defense framework includes 27 questions that evaluate advisors the way institutions do—across expertise, process, risk, fees, incentives, and accountability. These three are a powerful start.