A commission-based advisor is paid by the companies whose financial products they sell, such as insurance, annuities, or mutual funds, rather than by the client directly.
Commissions are typically built into the product: a sales charge on a fund, or a payment from an insurer when a policy is sold. Clients may pay nothing out of pocket, but the cost shows up in the product.
Broker-dealer representatives who recommend securities to retail customers must follow the SEC's Regulation Best Interest, in effect since June 30, 2020. That is a different standard from the fiduciary duty investment advisers owe.
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