What Does It Mean To Be Fee-Only?
There’s a lot of buzz lately about the importance of working with a fee-only financial planner. As a fee-only financial planner myself, I agree that the fee-only service model is, truly, what’s best for my clients. But not everyone who I speak with immediately knows what being a “fee-only” financial planner means. Let’s take a moment to define the fee-only movement, and what it means for you as someone who is looking for a financial planner.
What Does Fee Only Mean?
Fee-only financial planners are paid by their clients - and only their clients. There are some financial planning practices out there that are paid by their clients, but they also receive commissions from the sale of financial products. It’s tough to know if these advisors are truly acting in their clients’ best interest because there’s a conflict of interest in their fee structure.
There’s no way to know if they’re recommending a financial product, or an investment decision, or a way of growing your wealth because it’s what’s going to be best for you - or if it’s going to pay them more than another recommendation.
This concept is captured by the fiduciary rule. Fee-only financial advisors are held to the fiduciary standard, which means that they’re legally obligated to put their clients’ best interests above their own - always. Non-fee-only advisors (either firms that are paid by a combination of fees or commissions, or firms that are commission-only) aren’t held to this same standard.
What Kinds of Services Do Fee-Only Advisors Offer?
Fee-only financial planners or advisor firms offer a wide range of services. Here at Stonebridge Wealth Management, we offer:
Comprehensive financial planning
Wealth counsel
Business strategy
Investment management
Financial counseling
Millennial financial guidance
Retirement planning
Real estate investing guidance
Many fee-only financial planners will offer comprehensive services like ours that are intended to help you uncover all of your unique financial needs, and craft a financial plan and an investment strategy that addresses all of them.
Is There a Difference Between Fee-Only and Fee-Based?
Yes. Those advisors I mentioned earlier who are compensated by a combination of fees and commission? Those advisors are called “fee-based” financial planners. The title sounds close to fee-only, and many people who are looking for an advisor get the two mixed up. Unfortunately, the fee models that fee-only and fee-based advisors pursue are completely different. Although fee-based advisors still accept fees for their services from clients, they’re also getting a commission from a third party for the sale of financial products. These products might be an investment type, an investment from a specific fund, or an insurance product.
Fee-only advisors, on the other hand, will make recommendations without a conflict of interest. Because they’re only compensated by their clients, what’s best for the client is always top of mind when giving financial advice.
None of this is to say that all advisors who are fee-based, or commission-only, are “bad.” They just might not have the fee model that’s the best fit for a client who wants to always know, beyond a shadow of a doubt, that their advisor is looking out for their best financial interest.
Where Can I Find a Fee-Only Advisor?
First and foremost, Stonebridge Wealth Management is a fee-only financial planning practice! Our lead advisor, James Yarbrough, is a fee-only advisor who serves clients in and near the Greenville, South Carolina, area.
It might also be helpful, when interviewing advisors, to ask them for more details about how they’re compensated. A fee-only financial planner will be able to show you their ADV that lists that they’re only compensated by the fees that clients pay them. This should help to alleviate any lingering concerns you have that someone is fee-based, not fee-only.
Interested in Learning More?
I’d love to chat with you about the difference between fee-only and fee-based financial planning, and why Stonebridge Wealth Management has chosen to take the fee-only path. Feel free to contact me today with any questions you might have. I look forward to speaking with you soon!