Fee Only Financial Planner

The insights you’ll discover from our published book will help you integrate a variety of wealth management tools with financial planning, providing guidance for your future security alongside complex financial strategies, so your human and financial capital will both flourish.

Clients frequently share with us how the knowledge gained from this book helped provide them tremendous clarity, shattering industry-pitched ideologies, while offering insight and direction in making such important financial decisions.

Advantages and Disadvantages of Fee-Only Financial Planners

A great thing about dealing with a fee-only financial planner is the assurance that they are committed to serving your best interest. The advice they give is impartial in nature, aiming to support you in reaching your financial objectives, and as a fiduciary, they have this obligation by law, which creates a very comforting and reassuring level of trust and transparency, which most clients yearn for in seeking objective financial advice.

However, there are some disadvantages associated with a fee-only financial planner. Fee-only planners are sometimes said to have higher fees than advisors paid through commissions from the financial products they sell. The argument is that the direct charge for management and financial planning services by fee-only planners increases the upfront costs to be equal to the revenue of the commission-based advisors. For instance, fee-only financial planners offer a narrower range of services in certain areas, including insurance and security trading. This, therefore, limits your application in other areas where you may need services from other professionals in buying insurance or making trades, thus complicating your financial management. Suffice it to say, you need to understand what is needed in your particular situation and that the fee-only planner either provides or coordinates all services necessary to effectively attain your objectives.

Advantages of Using a Fee-Only Advisor

With a fee-only compensation structure, advisors’ income is obtained directly from clients’ payments of agreed-upon fees. They do not receive payment for the products they sell on the market or for the execution of trades, which enables them to provide fair and unbiased advice to their clients. And the advantage for the client is that there are no conflicts of interest with this model, and the costs are more predictable for the client.

Another very important dimension is that a fee-only advisor often will be a fiduciary, meaning they work with the best interest of the client placed ahead of their personal interests. Registered investment advisors, plus some others, like certified financial planners, are fiduciaries.

Financial advisors are only required to recommend investments that are “suitable” for the needs of the client, unless they are fiduciaries.

Fee-only advisors, working without commissions, are free to provide unbiased advice and recommend any products they might feel are best for the client. They will concentrate on helping you achieve your goals. Their financial plans, therefore, are more comprehensive. Also in that number are many fee-only advisors who are also fiduciaries and work on achieving your goals and not adding to their own earnings. There is more transparency in their fees, and you can see the effect on returns.

Disadvantages of Using a Fee-Only Advisor

Customers might pay commissions elsewhere; hence, fee-only advisors can be more expensive; yet, they might be more reliable because they don’t depend on other income.

Fee-only advisors may not offer all the services you need because they provide advice only in some areas, so that is something to watch out for. Fee-based advisors will be more motivated to sell you a complete portfolio of products.

On the other hand, if the advisor is inexperienced or unskilled, they cannot be the best advisor for you. Fee-only advisors are more expensive because they don’t work on commission, and they may not be at liberty to recommend certain products so you would have to go elsewhere for that service.

What Fees Do Fee-Only Financial Planners Charge?

Fee-only financial planners have several ways to charge their clients, which provides enough flexibility to meet different client needs and preferences. Perhaps the most common is to charge a percentage of the client’s assets under management—the fee paid to the planner is a percentage of the full value of the financial assets managed for the client. This can be anything from 0.5% to 2% per annum, determined by the size of the portfolio and the services provided.

Fee-only financial planners may charge an hourly fee for their services, or a monthly rate. In this case, the client expects to use the services for a one-time result or every so often. Hourly rates are widely different—from as little as $150 an hour to $400 an hour in some cases—depending significantly on the geographic region and the experience of the advisor. In contrast, monthly retainer fees provide access to financial planning advice during a time period, typically at a few hundred to several thousand dollars depending on the complexity of a client’s financial situation and the range of service.

Some fee-only advisors also offer a flat fee structure, where a client pays a set amount for a comprehensive financial plan or for specific services. This would be especially attractive for a client with a particular desire to know with clarity the cost upfront. High net worth clients have an increasingly complex and deep set of financial needs, resulting in more paid out-of-pocket and, theoretically, a greater base of assets under management. In most cases, what fee-only financial planners charge varies based on advisor experience, location, and services required. More experienced advisors normally charge more in fees, and this reflects their expert knowledge and track record in handling complex financial affairs.

Fee-Only vs. Fee-Based Financial Advisors

Fee-based financial advisors function differently. While fee-based may sound similar to fee-only, it describes advisors who are compensated from client fees and also from commissions or incentives that are received from the sale of some financial products. This is an inherent conflict of interest, for fee-based financial planners may feel compelled to recommend to customers products that earn them more commissions. Being aware of these differences and paying attention to them is crucial in the process of selecting a financial advisor because they will determine the advisor’s advice and incentives. The following table further illustrates the differences between fee-only and fee-based financial advisors.

In some product sales and financial transactions cases, advisors are also expected to act under a suitability rule to make sure that whatever they advise is suitable to the need of the client. A fiduciary duty is also conferred on fee-based as well as fee-only advisors. And this means that the advisor has the responsibility of acting in the best interest of the client.

A fee-based advisor, like a fee-only advisor, gets periodic advisory compensation directly from clients. Yet fee-based advisors are free to receive other types of compensation in addition, such as product- or referral-based commissions. These are typically triggered by the mere existence of the advisor serving as an agent of a broker-dealer or as an insurance agent, and providing a split-compensation system that compensates for both direct client fees and third-party commissions.

Those who serve such dual roles need only meet what is known as the suitability standard. The suitability standard states that the investments that are recommended need only be appropriate to the given client’s particular needs. It does not prevent the advisor from suggesting more costly investments that will pay higher commissions even when cheaper, equally good investments are available. There can therefore be potential conflicts of interest, as the advisor’s own income might dictate the advice their clients receive.

Contrastingly, the fiduciary standard, which is imposed on fee-only advisors and some fee-based advisors, mandates a higher level of ethical practice. The fiduciary standard mandates that financial advisors work for clients’ best interests only, similarly to the responsibilities of attorneys and medical doctors. Advisors have to make a complete disclosure of all conflicts of interest, even where one available recommendation has the potential to pay a larger commission than another similar option. The idea is that potential conflicts do not compromise the quality and objectivity of the advice offered.

Understanding the differences between the suitability standard and the fiduciary standard is vital for clients in making a decision about their choice of financial advisor. Although fee-based and fee-only advisors can both be subject to a fiduciary standard, the source of additional revenue for fee-based advisors makes it confusing for the client. It is essential to receiving unbiased and reliable financial advice that your advisor be forthright about their compensation and any potential conflicts of interest.

How to Find and Vet Fee-Only Financial Advisors

Besides getting recommendations from friends, family members, and colleagues, you can also explore finding a financial advisor automatically. An incredible option is SmartAsset, where you have access to a free financial advisor matching tool. This tool helps you find advisors who work in your vicinity, fee-only as well as fee-based. It will match you with up to three advisors, and you can pick the one that suits your needs best. This option simplifies the process of finding a reliable financial advisor and ensures you have access to qualified professionals. Besides SmartAsset, there are many other resources where you can hunt for a suitable advisor to help you manage your finances effectively.

After narrowing down your list of potential advisors and planners, you need to do your homework. You can start by scheduling an initial consultation with each of your prospects so you can ask questions and make a proper determination. You should ask each advisor about their experience and academic qualifications to gauge the breadth of their knowledge. You also need to ensure they do not have a criminal record. You should ask about their areas of focus and the types of services they provide in order to ensure that they meet your requirements. Don’t hesitate to ask any other questions that you have, or raise any issues that seem to be of concern, as this degree of focus will allow you to make an informed decision.

3 Reasons to Hire a Fee-Only Financial Planner

1. Fewer conflicts of interest
2. Advice is the focus
3. Variety of payment choices

1. Fewer conflicts of interest

A fee-only advisor, whose compensation comes directly from the client, is more likely to provide unbiased advice. And if they are a fiduciary, then by law, they have to act with the client in mind and put their best interest first. In contrast, a commission-based advisor will typically act in their own best interest, chasing after more and bigger commission sales.

2. Advice is the focus

Fee-only advisors aspire to offer unbiased advice that is in the best interest of their clients given their financial situation. They will work to produce a financial plan that is best for the individual, and they will recommend products that align with that plan.

3. Variety of payment choices

Some fee-only advisors may charge an annual fee for their services. Or they may charge a percentage of assets under management. Some advisors charge an hourly fee, a per-service fee, or a retainer. 

Why You Shouldn’t Work with a Commission-Based Financial Planner 

In light of these different compensation structures, does one stand out as the best? Let’s start with commission-earning financial planners. In this payment structure, a financial planner may put their interest in earning money ahead of your portfolio’s earnings.

Those financial planners who are commission-based might try and sell you a product where they make money from the sale or referral fees, and not provide the best rate of return.

You want an advisor who will guide you in the right direction without putting their needs before yours. An exceptional investment advisor should begin by listening to your problems and only afterward suggest solutions based on your needs.

The focus should always be on helping you achieve your financial goals. Therefore, it’s important to find a financial advisor whose primary interest is not how many financial products a client purchases. So, it’s often best to go with an advisor that earns compensation based on a fee-only model.

Would you like to know more in detail about hiring a financial manager? Make sure you get your hands on a complimentary copy of The Ultimate Guide for Investors with $5 Million to $500 Million in Liquid Assets on how to select the best financial advisor. 

Why are fee-only financial planners the most popular choice of advisor?

The primary value proposition you receive from a fee-only financial advisor is that they deliver comprehensive advice to their clients. This means that fee-based financial planners are not motivated to sell you anything in particular.

Rather, their product is their service, and therefore, they will only suggest products that are best in your situation. This means the financial planner will recommend products only when they have a real impact on your financial needs.

Fee-only financial planners are usually licensed and held to a fiduciary standard. A financial planner who has a fiduciary responsibility is devoted solely to serving your best interest, for their compensation.

Moreover, this is an ethical requirement for a certified financial planner (CFP). A CFP must adhere to professional and ethical codes of conduct to keep their certification. However, that does not mean being a CFP makes them the best financial planner—years or decades of experience in the industry can often be better than years of education.

Another benefit of hiring a fee-only financial planner is that they earn compensation only when improving your financial situation and planning your financial future. With a fee-only planner, their best interest is to meet your financial goals.

When the advisor earns compensation on an hourly basis by doing a financial review or by creating a financial plan for a fixed project fee, such as a retirement plan, you know that they’re doing what’s in your best interest.

A great thing about working with a fee-only financial planner is they have a standard—being a fiduciary. This means they will mitigate any conflict of interest when offering financial products. Their relationship with the client will be transparent because the financial planner is most interested in meeting the client’s financial goals.

A fee-only financial advisor is also the appropriate choice for high net worth individuals because they need someone that can be trusted to manage significant assets to meet complex financial needs.

Before trying to select a financial planner, be sure to get your copy of our guide Improving Portfolio Performance: The Shifts Multi-Millionaires Must Make To Achieve Financial Security and Serenity from our team at Pillar Wealth Management, LLC.

Why should I hire a fee-only financial advisor?

Hiring a fee-only financial advisor is justified by their obligation to act in the client’s best interest, a fundamental part of their role.

For example, a car salesperson will tell you about their best vehicles. They will not talk about other dealerships that could have higher-quality vehicles on their lots. This is an example of a nonfiduciary advisor. A fiduciary advisor will discuss all your product options, even those not available at their company because their primary concern is to work in your best interest.

You’re probably wondering why this is important. With a fiduciary advisor, there will be fewer conflicts of interest because a fee-only advisor will not have any incentive other than recommending products most likely to help you. They will only recommend financial products if you need that product to improve your results.

Think about your financial future. As you get older, or your business gets bigger, you will be busier and wealthier, which makes your financial goals more complicated. You will need a professional working in your best interest to save you time in managing your complex financial needs.

Fee-only advisors will analyze your financial situation and provide comprehensive advice according to your needs. They will review your investment portfolio. The fee-only planner does not think about personal gain because they have a responsibility to grow the client’s wealth and help clients meet their financial goals.

You need to hire a fee-only planner because their focus is growing or maintaining your wealth rather than growing their own wealth. They understand that by helping you succeed financially, you will not hesitate to hire them for the long term. Fee-only financial planners do provide the best advice because it’s their responsibility.

As you grow your relationship with your advisor, they will likely create better results because they only act with your best interest in mind. They ensure the safeguarding of your riches if you are a high net-worth individual. We can provide you with a resource called The Art of Safeguarding Ultra-High Net Worth Portfolios and Estates: Techniques for Families Valued Between $5 Million and $500 Million. 

The Best Financial Planners Near Me

Now, you are prepared to search for the top financial advisor near you to assist you in handling your finances. Financial experts provide various services to improve your financial circumstances. Having the right financial planner allows you to get specific instructions to improve your financial health.

If you are searching for a financial planner that manages clients with $5 million to $500 million investment portfolios, learn how Pillar Wealth Management, LLC. can help. Register here for a consultation with company co-founders Hutch Ashoo and Chris Snyder today.

What are the fees that you can expect?

This is another important topic that you should ask about while selecting a planner. The advisor should give you a list of all the services they provide for a fee. If there are hidden fees or higher prices for certain services that you need, you should be able to discuss these costs with the planner.

Which services does your advisor provide?

You should be able to ask about specific services that will be offered to you. If there are specific services that you know you need, be sure to discuss these needs during an interview. It may also be wise to inquire about additional financial assistance that is available to you from other people in the firm. These features could include free financial planning, investment strategies, as well as tax advice. In fact, your financial planner just might offer these as well.

How long will the advisor work with me?

It is crucial to inquire about this when you are beginning with an advisor. If you are looking for a lasting and ongoing relationship, you might find someone who is more willing to collaborate with you than someone who is trying to close a short-term deal.

Choosing a financial advisor may pose difficulties. We developed this complimentary tool for those looking to simplify the process.  Don’t miss your opportunity to receive The Ultimate Guide to Choosing the Best Financial Advisor: For Investors with $5 Million to $500 Million in Liquid Assets, from our team at Pillar Wealth Management, LLC.

How does the planner manage my account?

If you are getting advice from someone other than a broker, this will be a critical question to ask. Also, make sure that you understand what it will take to access all the assets of your account after investments have been made.

Will the financial planner be an independent third party or a full-service firm?

Make sure that you understand all the parties that will be involved in managing your money. Some financial planners do not offer investment management services themselves, such as buying stocks and other securities. Be sure to ask whether they partner with others that manage your finances.

What are the firm’s fees for the advisor and the plan?

This is an important question to ask, and it will likely differ from planner to planner.

What is the fee structure to expect based on the investment amount they’ll manage?

Remember that the fees will vary based on the funds being handled in your investment portfolio. Make sure to inquire about the standard fees you will be required to pay. 

How will I get the advisor to answer my questions?

Locating a financial planner to answer your questions is simple. Just contact one and set up an appointment. They should offer consultation for people interested in their services.

Although it’s nice to have an advisor in your local area, you should also know that you do not need to settle for the best fee-only financial planner near you. 

Another option is to think about having a consultant from a different location who can have phone or online meetings with you.

If you are thinking about hiring a financial advisor and have between $5 million and $500 million to invest, reach out to discuss it further. The team at Pillar Wealth Management LLC. can provide you with a consultation with co-founders Hutch Ashoo and Chris Snyder, at no cost and with no obligation.