business resources
Fiduciary, Fee-Based or Commission: Six Questions Business Owners Should Ask Before Hiring a Financial Advisor
06 Oct 2026
Most business owners spend years building one asset and very little time choosing who will help them manage what it eventually becomes. The Exit Planning Institute's 2023 National State of Owner Readiness Report estimates that the business is, on average, 80% of an owner's net worth. The same survey found that nearly 40% of owners either had no personal financial plan or had never had one reviewed by an advisor.
That gap matters most at the moment the company's value turns into cash, through a sale, a partial buyout or a run of strong distributions. Owners who read every clause of a supplier contract often hire an advisor on a referral and a good first impression. A better approach is to treat it like hiring a senior executive: ask direct questions, then check the answers against the public record.
Why Owners Need a Different Kind of Advice
An employee with a 401(k) and a mortgage faces fairly standard decisions. An owner does not. Business equity, irregular income, entity structures, buy-sell agreements and a possible liquidity event all affect each other, and a recommendation that looks sensible on its own can create a tax or concentration problem somewhere else.
That is why owners tend to need coordination more than products. Consider a founder in Arizona who has just sold a stake in a regional company. Someone in that position who starts looking into wealth management in Tucson is rarely shopping for a single fund. They want one person or team who can see investments, taxes, estate documents and risk in the same picture. How that advisor is paid, and what legal duty they owe the client, shapes the quality of that picture.
The Standards Behind the Job Titles
In June 2019, the Securities and Exchange Commission adopted a package of rules to clarify how financial professionals must treat retail investors. Two parts matter when you interview advisors.
The first is the SEC's interpretation of the fiduciary duty that registered investment advisers owe their clients under the Investment Advisers Act of 1940. The Commission described that duty as principles-based and said it applies to the entire relationship with the client, not only to individual transactions.
The second is Regulation Best Interest, which broker-dealers had to comply with from June 30, 2020. It requires a broker to act in the retail customer's best interest when making a recommendation, a clear step up from the older suitability standard. It is still a separate framework, tied to each recommendation rather than to an ongoing advisory relationship.
Professional credentials add another layer. Under the CFP Board's Code of Ethics and Standards of Conduct, effective October 1, 2019, a CERTIFIED FINANCIAL PLANNER® professional must act as a fiduciary at all times when providing financial advice to a client. Working with a fiduciary financial planner does not remove the need for due diligence, but it gives you a written standard to hold the relationship to.
How Advisors Get Paid
Some advisors are paid exclusively by their clients through an asset-based fee, a flat retainer or an hourly rate. Fee-based advisors also charge clients directly, usually as a percentage of assets under management, and may in some cases receive commissions on products such as insurance. Commission-based professionals are paid mainly through the products they sell.
No model is automatically right or wrong. What matters is that you understand exactly how the money flows and that every conflict it creates is disclosed in writing before you sign.
Six Questions for the First Meeting
- Are you acting as a fiduciary at all times, for every account and every recommendation? Ask for the answer in writing.
- What will I pay in the first year, in dollars? Percentages are easy to underestimate. Ask for the figure on your actual balance.
- Do you or your firm receive anything from third parties when I buy a product? That includes commissions, revenue sharing and sales incentives.
- Who makes the day-to-day investment decisions? Find out whether portfolios are managed in-house, by outside managers or through models, and where the assets are held.
- How will you work with my CPA and my attorney? For owners, the best advice often comes out of that three-way conversation.
- What changes in your plan if I sell the business in the next five years? A good advisor talks about taxes, timing and cash needs before talking about investments.
Check the Record Before You Sign
Every SEC-registered investment adviser and broker-dealer that serves retail investors must give you a short relationship summary, Form CRS, describing its services, fees, conflicts of interest and any disciplinary history in plain English. Investment advisers also publish Form ADV Part 2A, the firm brochure, which is searchable through the SEC's Investment Adviser Public Disclosure site. For individual brokers, FINRA's free BrokerCheck tool shows registrations, employment history and disclosures.
Twenty minutes with these documents can tell you more than an hour of sales talk. Some firms make the comparison easier by stating their standard on the first page of their website. Ironwood Financial in Tucson, for example, describes itself as a fiduciary, fee-based advisory firm and links to its client relationship summary from every page, a concrete document to test against the six questions above.
What Good Looks Like
A well-run advisory relationship tends to feel predictable in the best sense. Fees are stated in dollars, the fiduciary commitment covers the whole relationship, and conflicts are named before you have to ask. The advisor wants to understand your company, your partners and your plans for the business before proposing a portfolio.
The principle is the same one you already apply to your own company: understand the incentives, get the key terms in writing and check the record before you commit. The wealth you spent decades building deserves at least that much scrutiny.
