What is a Fee-Based advisor?
A Fee-Based advisor is similar to a Fee-Only advisor in the sense that BOTH are fiduciaries.
A fiduciary owes to clients a duty of good faith and trust. The highest legal duty of one party to another, being a fiduciary requires being bound ethically to act in the other’s best interests.
The fiduciary standard of care requires that a financial advisor act solely in the client’s best interest when offering personalized financial advice.
Money management fees
Fee-Based advisors, like Fee-Only advisors, make the bulk of their money charging clients a fee to manage their investable asset (stocks, mutual funds, etc).
Advice with less limitations
Unlike Fee-Only advisors who have essentially sworn a cult like oath to never making a commission, Fee-Based advisors CAN make commissions when selling fixed insurance products.
Why is this a HUGE differentiation between the two types of advisors?
That’s really what this entire website is all about. The ignorance and built-in biases Fee-Only advisors have when it comes to any product that pays a commission.
As you’ll read in the Bad part of this website, the vast majority of Fee-Only advisors know very little if anything about commission based fixed annuities and cash value life.
As the author of books titled: Retiring Without Risk and Peace of Mind Planning: Losing Money is No Longer an Option, I can state as a fact that it is impossible, absolutely impossible, for a financial planner to give clients suitable and comprehensive financial planning advice unless you know well and incorporate the use of fixed life and annuity products.
If you want to learn about two of my favorite wealth-building/retirement tools, click on the following links:
–Fixed Indexed Annuities
Summary on Fee-Based advisors
Fee-Based advisors are much more likely to know and appropriately use the previously listed retirement tools.
The chances that a Fee-Only advisor knows anything about these products or uses them appropriately in a financial/retirement plan is close to ZERO (which is why I created this site to educate consumers on the limitations and biases of Fee-Only advisors (ones that are normally not disclosed to clients)).
Roccy DeFrancesco, JD
Author of Bad Advisors: How to Identify Them; How to Avoid Them