How Does Fee-Only Financial Advice Work?
A fee-only financial advisor is compensated directly by clients rather than through commissions from selling financial products. Fees may be based on assets under management, a fixed amount, or an hourly rate.
While a fee-only structure can reduce certain conflicts of interest, it may not eliminate them entirely. Understanding how an advisor is compensated, including any potential conflicts, should be considered when choosing whom to work with.
What's the Difference Between Fee-Only and Fee-Based Advisors?
Although the terms are similar, they describe different compensation arrangements.
- Fee-only advisors receive compensation directly from clients and do not earn commissions from selling financial products.
- Fee-based advisors may receive client-paid fees as well as commissions or other compensation associated with certain products.
The distinction does not automatically determine which advisor is right for you. However, it can help you understand how recommendations may affect an advisor's compensation and what potential conflicts should be considered.
Is a Fee-Only Financial Advisor Also a Fiduciary?
Not necessarily. Fee-only describes how an advisor is compensated, while fiduciary refers to the legal standard they must follow when providing advice.
Registered investment advisers are subject to a fiduciary duty that includes obligations of care and loyalty. This requires them to act in their clients' best interests when providing investment advice and to appropriately address conflicts of interest.
What Services Does a Fee-Only Financial Advisor Provide?
The services offered by fee-only advisors vary. Some focus primarily on investment management, while others provide comprehensive financial planning that considers multiple aspects of a client's financial life.
Depending on the firm and the scope of the engagement, services may include:
- Retirement planning and income strategies
- Investment management and portfolio construction
- Tax-aware financial planning
- Estate planning considerations
- Cash flow planning and advice around major financial decisions
For individuals and families with more complex financial circumstances, coordinating these areas can be especially valuable. Decisions about investments, retirement income, and taxes often affect one another, making it important to evaluate them together rather than independently.
Fee-Only Financial Advice at Core Wealth Management
At Core Wealth Management, our fee-only fiduciary approach is central to how we work with clients. Our CFP® professionals, CFA charterholders, and CPAs bring together tax-aware financial planning and investment management to provide coordinated, personalized guidance.
Learn more about our Financial Planning and Investment Management services, or schedule an introductory conversation.
Schedule a ConversationFrequently Asked Questions
How do fee-only financial advisors get paid?
Fee-only financial advisors are paid directly by their clients. Common arrangements include fees based on assets under management, hourly fees, and fixed financial planning fees. They do not earn commissions from selling investment or insurance products.
Does fee-only mean there are no conflicts of interest?
No. While fee-only compensation eliminates commissions associated with selling financial products, other potential conflicts may still exist. Fee-only advisors must still identify, disclose, and appropriately address these situations.
Are fee-only financial advisors required to provide comprehensive financial planning?
No. Fee-only refers to compensation, not the scope of services. Some fee-only advisors focus primarily on investment management, while others offer comprehensive financial planning alongside investment management.
Where can I verify how a financial advisor is compensated?
You can review an investment advisory firm's Form ADV Part 2 brochure for information about its services, fees, compensation arrangements, and potential conflicts of interest. These disclosures are available through the SEC's Investment Adviser Public Disclosure website.