Financial advisers have traditionally received their income from upfront trail commissions paid on insurance policies and investment products they have sold.
These commissions, though paid by the product provider to the adviser, are funded from the profits made within the products. In effect, the owners of those products therefore pay, albeit indirectly.
If you are not paying a fee for advice, then it is probable that your adviser is receiving a commission.
Upfront commission is paid when the product is bought and this can be a significant amount.
This is usually followed by a trail commission, paid at regular intervals to your adviser.
If you choose to cancel your insurance policy or cash-in your investment there is usually a claw-back of the upfront commission.
Sometimes this is paid by the adviser - which is why they may be very reluctant for you to cancel or withdraw - and sometimes paid by the client as an exit fee if an investment is cashed in.
The point of trail commission is to provide financial reward to your adviser for continuing advice given to you.
Find out how much commission you are paying by contacting either your adviser or the supplier of the product.
Given that this is being paid by you, indirectly, you need to be sure you are getting the service you are paying for.
Advisers often sell their clients to other advisers, and it may be that the person receiving commission from you is someone other than the person who sold you the product - someone who may be a complete stranger.
If you are not satisfied you are receiving adequate advice, ask your adviser to rebate the commission to you, or alternatively find an adviser who truly earns the income received.
Liz Koh is an authorised financial adviser. The advice given here is general and doesn't constitute specific advice to any person. A free disclosure statement can be obtained by calling 0800 273 847.