A Commission is a form of compensation that a Broker or Sales Agent charges for each transaction. Commissions have inherit conflicts of interest in that Brokers have incentives to recommend Securities that pay the highest commissions. In addition, Sales Agents have incentives to “churn” investments; the more transactions, the more commissions. If an Advisor receives commissions, he must be licensed as a Salesperson. In addition, the advice he is giving has a conflict of interest and must be disclosed to clients.
My Take
I recommend asking your Advisor if he receives commissions on the securities that s/he recommends. Discovering conflicts of interest in legal documents is not always easy.
