How commissions work For example, if you invest money in a managed fund through a licensed financial adviser, the fund will usually pay a commission to your adviser. The commission may include part of the entry fee you pay to get into the fund a regular commission, called a trailing commission, for as long as you stay with that fund and other rewards and incentives if the financial adviser meets the funds' sales target. In most investment products, commissions come out of the money you invest at the beginning, or they come out of your fund each year as expenses that you and your fellow investors pay for. Either way, you pay for the commissions your adviser receives. Some banks that offer investment advice pay commissions to their staff to encourage them to sell the bank's products.
Insurance companies pay commissions to their agents and to insurance brokers.
Stockbroking firms charge you a brokerage fee, and may pay your adviser a commission on the value of your purchase or sale to bring in more business. A number of advisers get paid only through fee for service and hourly rates. Commissions reward the adviser not the consumer Investment and superannuation funds, insurance companies, banks and stockbrokers compete fiercely for your business. However, most people do not know which products to buy, and rely on advisers. Take managed funds for example.