Before getting into the good about a fee only advisor, readers first need to understand what a fee only advisor is.
What is a Fee-Only advisor?
Fee-Only advisors differentiate themselves from other advisors by how they are compensated. The following is classic language that a Fee-Only advisor would use to explain why they are different and, as they would argue, better than any other type of advisor.
“Fee-Only advisors do not work for commissions but rather earn a percentage of assets under management. This assures that your personal interests are served and that your advisor is not potentially swayed by any personal or corporate conflicts of interest.”
How are Fee-Only advisors paid?
1) They can charge a fee (such as a $2,500 fee to “design” a financial plan).
2) They can also be paid on a percentage of assets they manage. So, if they manage a client’s $500,000 brokerage account, they are paid a fee based on the value of the assets (typically 1% annually).
Fee-Only advisors are NOT allowed to sell mutual funds that pay up-front commissions, life insurance policies that pay a commission, or annuities that pay a commission.
Avoiding conflicts of interest
Fee-Only advisors tout that they are the only advisors in the industry who are positioned to give clients the best “unbiased” advice.
The rationale is that because they can’t make money from commissions/transactional sales, they will not make recommendations in the short term to make themselves bigger up front revenue from the sale of commission based products.
Interests are aligned
A Fee-Only advisor touts the fact that his/her interests are the same as their clients. That goal being to grow the client’s wealth to the highest amount without regard to what tools are used. As the client’s money grows, so will the fee of the advisor who charges a fee based on the total assets (their goals are aligned).
What do you think?
It makes sense when you first learn about Fee-Only advisors. Wouldn’t you rather use an advisor whose interests are aligned with yours and who can’t sell commission based products (therefore, there is no incentive to use up-front commission products as a money grab for the advisor).
Are you sold yet? Are you ready to go find a local Fee-Only advisor to help you grow your wealth for and in retirement?
The rest of the story…
You will learn the rest of the story by reading the “Bad” and the “Ugly” about Fee-Only planners. Once you read the rest of the story, you will be in a position to determine if a Fee-Only advisor is the best type of advisor to help you accomplish your financial planning goals.
Roccy DeFrancesco, JD
–Bad Advisors: How to Identify Them; How to Avoid Them
-Retiring Without Risk
-Peace of Mind Planning: Losing Money is no Longer an Option
-The Home Equity Acceleration Plan
-The Home Equity Management Guidebook
-The Doctor’s Wealth Preservation Guide
-21st Century Advisor
-21st Century Attorney