Fee-Only vs Commission Financial Advisers in NZ: What Is the Difference?

The difference in one line

A fee-only adviser is paid only by you. A commission-based adviser is paid by the company whose product you take up. Many advisers mix the two.

How each model works

Fee-only. You pay a fixed fee, an hourly rate or sometimes a percentage of what you invest. The adviser receives nothing from banks, insurers or fund managers. The cost is visible upfront, and no product pays the adviser more than another.

Commission-based. The adviser is paid by the provider, usually when you take out an insurance policy, a mortgage or an investment. You may pay no fee at all. The trade-off is that the adviser is paid only if you buy, and some products pay more than others.

Hybrid. Some advisers charge a fee and also receive commissions, or charge a fee for planning and earn commission on the products they place.

What the law requires either way

Since 2021, anyone giving financial advice to retail clients in New Zealand works under the Financial Markets Conduct Act 2013 and the Code of Professional Conduct for Financial Advice Services. In plain terms, every adviser must:

• tell you how they are paid, including commissions, before giving advice;
• disclose conflicts of interest;
• give priority to your interests where there is a conflict;
• meet the Code’s standards of competence and care.

So commission-based advice is legal, regulated and often good. The question is which model suits you.

Fee-only: pros and cons

Advantages

• The cost is clear, and you know exactly what you are paying for.
• No incentive to recommend one product or provider over another.
• Advice can include “do nothing” or “pay off debt first”, which no product pays for.

Disadvantages

• You pay upfront, even if you end up making no changes.
• For insurance, buying direct means no broker manages your policy or a claim for you. A good fee-only adviser will tell you when a licensed broker is the better route.

Commission: pros and cons

Advantages

• Advice can cost nothing upfront.
• For insurance and mortgages, a broker can handle applications and help at claim time.

Disadvantages

• The adviser is paid only if you buy, which is a built-in pressure toward a product.
• The cost is less visible, because it sits inside the product.

Which should you choose?

Fee-only usually suits you if you want a full plan across your whole financial life, a second opinion, or advice that is not tied to buying something. Commission-based advice can suit a single, well-defined need, such as arranging a mortgage or a specific insurance policy, as long as you understand how the adviser is paid.

Whichever you choose, ask: “How are you paid for this recommendation, and by whom?” A good adviser answers that clearly and in writing.

How MoneyPlan works

MoneyPlan is fee-only. You pay a flat, published fee and that is the only payment: no commission, referral payment or incentive from any provider, including the licensed insurance broker partners clients are sometimes referred to. You then put your plan in place directly with providers, in your own name.

Next, read how much a financial adviser costs in NZ or how to choose a financial adviser.