Fee-only means that a financial advisor is 100% compensated by clients. Fee-only advisors may charge fees as a percentage of the investments they manage (called “AUM” for “Assets Under Management); as a fixed fee for investment management, financial planning, or both; or hourly.
“Fee-based” is a term that is no longer allowed to be used by CFP® certificants, but many still do. Technically it means that they can charge a fee to the client while also making commissions on products they select for those clients. CFP® certificants who receive any form of compensation from third parties must refer to themselves as “commission-and-fee,” not fee-based anymore. If you see an advisor advertising they are “fee-based,” ask them directly about all the ways they are compensated.
If you are not sure whether an advisor is fee-only, the National Association of Personal Financial Advisors (https://www.napfa.org) is the nationwide association that vets financial advisors for true fee-only business models. If an advisor is a member of NAPFA, you can consider them to be fee-only. If they are not a member, you might ask the reason why not, or, review their ADV Disclosure Brochure to check for compensation from third parties.
How is advice-only different from fee-only?
A fee-only advisor may manage a client’s investments. An advice-only advisor is a type of fee-only advisor who only gives advice and does not manage investments. Advice-only advisors may give advice solely about investments, or they may do more holistic financial planning, or a combination.
What type are you?
We are fiduciary fee-only, advice-only, hourly. At this time we do not accept investment-only advice engagements. All engagements must begin with a financial plan in order to incorporate investment advice.
For more on what to expect from the financial planning process, see: https://www.hollydonaldsonfinancialplanner.com/financial-planning/
To learn more about what to expect from a complimentary initial consultation call, see: https://www.hollydonaldsonfinancialplanner.com/contact-us/