Is Your Advisor Fee-Only?

Is your financial advisor fee-only?

If you’re sitting there scratching your head right now wondering - What the heck does fee-only mean? - you’re not alone. Most people don’t know what, exactly, a fee-only advisor is, and what that means for them. Let’s explore what being a fee-only financial advisor means, and why it’s important.
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​What Is the Fee-Only Movement?

Financial advisors can be compensated in three different ways:

1. Fee-only.
2. Fee-based.
3. Commission-only.

At Wisely Advised, we are a fee-only financial planning practice. This means that we’re only compensated by the fees our clients pay us. There are no commissions earned from selling financial or insurance products, and we never accept any “kickbacks” for our recommendations.

We offer financial planning, investment management, retirement planning, college education planning, and estate planning help - all for the fees paid by our clients. We believe that this allows us to maintain a client relationship that’s built on trust and honesty. The advice we give is always intended to be in your best interest - because we work for you and you alone.

However, not all financial advisors are the same. Commission-only advisors, for example, don’t necessarily charge fees for their financial planning services. Instead, they receive a commission from selling you insurance or financial products. Fee-based advisors strike a balance between fee-only and commission-only fee models. They have some financial planning fees, but may be selling insurance or financial products, as well.
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The Fiduciary Oath

As a fee-only financial advising practice, we abide by the fiduciary oath. This means that we are legally obligated to always act in our client’s best interest. The oath goes on to say that all advisors who are abiding by the fiduciary oath must go so far as to put our client’s best interest above our own.

That sounds great in practice, but what does it mean for you? Is working with a fiduciary, fee-only advisor really going to make or break your financial life?

In short - yes.

If an advisor is fee-based or commission-only, they’re receiving money for selling you, their client, a financial or insurance product. If they have the choice between making a commission off the sale of a financial product that’s going to perform well for you, or recommending the best possible option for your unique financial situation and goals - even if it won’t earn them a commission - there’s a chance that they’ll recommend the money-earning product. Even if it isn’t the best option for you.

This is the difference between the fiduciary oath and suitability. Fee-based and commission-only financial advisors can abide by suitability standards. They’re making recommendations that are suitable to you, but possibly not the best option available. Fee-only advisors don’t have these same conflicts of interest, so they’re able to uphold the fiduciary oath.

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Don’t Be Afraid to Ask!

When you interview a new advisor, it’s so important to ask about their fee structure. If they can’t definitively say that they’re fee-only, you may need to do some deeper digging to understand how they’re compensated. In the world of financial planning, there are many salespeople out there who aren’t looking out for your best interest. They’re not necessarily invested in helping you connect your money with your life, and guiding you to achieve your biggest financial goals and dreams.

Unfortunately, because this is true, it also means that advisors who aren’t fee-only likely aren’t going to come right out and say so. In these situations, it’s important to take charge an be your own advocate. And if you feel like you need help knowing what questions you should ask, I encourage you to reach out to the Wisely Advised team. We’d be happy to walk you through what questions are worth asking, what answers or red flags you should look for, and what being fee-only or fiduciary is all about.

Ready to learn more? Contact us today!

Tony Velasquez runs Wisely Advised, LLC a full-service Registered Investment Advisory Firm offering Financial Planning, Accounting and Investment Advisory services to individuals, families, and businesses. 
 
Whether it's traveling, being at the beach, or at his family's ranch in Texas, Tony loves enjoying time with his family and friends. ​​