Best Fee Only Financial Advisors: Are They Your Best Choice?
There’s often a whole lot of confusion surrounding how to choose financial advisors. While some people believe Best Fee Only Financial Advisors are the only way to go, others think that brokers charging commissions can be acceptable as well. While compensation is an essential factor in choosing an advisor, our guide for people with $10 million+ provides a more detailed list of characteristics that you should look for when choosing one.
When families with $5 million to $500 million look for financial advisors, there are lots of options they can go for. Understanding the importance of fee only models is important, and it can allow you to become a more knowledgeable investor. We recognize that affluent investors can be quite busy. If you don’t have the time to read this full article, you can discuss all the benefits of a fee only compensation model with us.
For those looking for a complete guide on Best Fee Only Financial Advisors, this blog will answer the following questions:
– What are Best Fee Only Financial Advisors?
– What services do Best Fee Only Financial Advisors provide?
– Why high net worth investors should hire Best Fee Only Financial Advisors?
– How do Best Fee Only Financial Advisors help their clients?
Table of Contents
What Are Best Fee Only Financial Advisors?
Financial advisors come in all shapes and forms, providing a wide variety of financial advisory, financial planning, or investment management services.
These services can be fulfilled by professionals like investment advisors/brokers, financial planners, asset managers, wealth managers, and others. Though you can classify financial advisors based on their services, you can also separate them based on their compensation models.
Let’s take a closer look at the various types of compensation models you might find with a financial advisor.
Best Fee Only Financial Advisors
Best Fee Only Financial Advisors charge a management fee for the services they provide. Their earnings are dependent on how much they’re able to help grow your wealth. If your wealth increases, their earnings increase, too. Therefore, your interests and their interests match. They will also want nothing more than to help you succeed.
However, that isn’t the complete story. With the fee only model, there are three distinct types.
One-time flat fees
This is a fee only compensation model adopted by some financial planners or other advisors that provide short-term services. You only have to pay the advisor one time to get their service. The norm here is that you pay the one-time fees to meet with the advisor, discuss your financial situation, get the recommendations you need, and be on your way.
You typically won’t have any more contact with the advisor after that meeting unless you go in for another consultation later down the line. The catch here is that you’re on your own after getting the recommendation. Though this can work when you want to resolve specific short-term financial issues, it’s not something we recommend to most investors. This is because the one-time advice you get from the expert won’t stay relevant for too long. As your life changes and the market evolves, the recommendations may not remain optimal.
A percentage-based fee is usually the preferred option for fiduciary financial advisors like wealth managers. A percentage fee is usually charged on an annual basis for an ongoing service where clients get continuous management and advice for their wealth. These managers will actively collaborate with you and constantly monitor your portfolio to keep you on track of your goals.
Since their remunerations are somewhat dependent on how well they achieve your goals, these managers are usually the optimal choice for affluent investors. If you’re a high net-worth or ultra-high net-worth individual looking for fiduciary Best Fee Only Financial Advisors, contact Pillar Wealth Management for a free discussion about your goals.
The hourly fees model is not something we see very often. This is often charged by “walk-in” advisors. You can occasionally visit these professionals, get their services, and pay for the amount of time you spend with them. It’s a model that works better than the one-time fee but doesn’t quite bring the same benefits you get with an advisor that charges a percentage-based fee.
Commission-Only Financial Advisors
Commission-only advisors are quite popular today. They make their money off commissions on the transactions you make. These professionals will recommend what securities or products you need to buy, sell, or hold. Whenever you buy or sell a security, the advisor will charge a certain commission on the transaction.
The issue here is that commissions can often provide an incentive to your advisor for encouraging more and more transactions. Their own interests are at play here, too! The more transactions you do, the more money your advisor makes. It’s better to avoid commission-only advisors altogether, even if some guarantee that they only have your best interests in mind.
Fee Based Financial Advisors
This compensation model is a hybrid of the two mentioned above. This is a complicated system where the advisor charges a fee for their normal services but may charge commissions for dealing with other products. Depending on the advisor, some may disclose this before you hire them, and some may not.
Clearly, the safest and most reliable option for affluent investors is to pick an advisor that charges percentage-based fees. Readers can find more justifications behind this recommendation in our guide about financial advisors.
What Services do Best Fee Only Financial Advisors Provide?
The services you get from Best Fee Only Financial Advisors will depend on the type of advisor you go to. Each different professional has a certain set of skills, knowledge, and experience that they can offer. Most advisors choose to specialize in a specific niche and offer very exclusive services.
However, there are some advisors that offer a complete set of services. Wealth managers and advisors are usually an option that is available to high net-worth and ultra-high net-worth investors. These experts offer almost every financial service offered by other advisors at premium quality. They provide exquisite personalization and high expertise in what they do. Of course, a few individuals cannot provide all possible financial services, so they work with the best professionals for ancillary services.
For ultra-high net-worth individuals, these experts can play an important role in taking away financial stress. Before we go further, we recommend that you read The Art Of Protecting Ultra-High Net Worth Portfolios And Estates, Strategies For Families worth $25 Million to $500 Million. This is our free hardcover book that tells ultra-high net-worth families exactly how they can find the best wealth managers for their special needs.
That said, here are some services you can expect to get from Best Fee Only Financial Advisors:
– Investment management
– Insurance planning
– Asset management
– Tax management
Why High Net Worth Investors Should Hire Best Fee Only Financial Advisors?
For people who have read our guide for individuals with $10 million+, the value of fiduciary advisors will be apparent. Since Best Fee Only Financial Advisors are typically fiduciaries, too, the same advantages can apply to them as well.
Let’s take a look at some of the reasons why high net worth investors should hire Best Fee Only Financial Advisors.
No Conflicts of Interest
As we said, most Best Fee Only Financial Advisors are licensed fiduciaries charged with serving the interests of their clients above everything else. Even with those fee only advisors that aren’t necessarily fiduciaries, you won’t find any conflicts of interest in their remuneration methods.
This is because this compensation model is not tied to your portfolio’s performance or how many transactions you do. It’s a simple fee for their service. Your advisor can’t earn more money by suggesting a certain financial product or by moving your money around more often. To learn more about why those two things are damaging to your wealth, read our guide on portfolio performance.
Knowledge and Expertise
When someone is a fiduciary fee only financial advisor, you know that they have ample experience in the industry and the knowledge needed to help you achieve financial security. Fee only wealth managers can preserve and grow large portfolios, reduce your expenses and taxes, create retirement plans, and even more. Thanks to all the time they’ve spent in the industry, they know how to sustainably help you live the life you want.
Though we touched on this earlier, it’s important to give it a distinct mention. Advisors with a fiduciary duty are people with a legal duty to perform according to your best interests. They’re usually Registered Investment Advisors who’ve been vetted by the SEC.
In order to become an RIA, advisors need to meet very high quality and moral standards. At Pillar Wealth Management, we employ fiduciary experts to ensure that we can provide you with the service you deserve.
We want to achieve your financial goals. We want to protect your wealth. We look after your best interests. Get started on your journey towards financial serenity today by booking a discussion with us.
How Do Best Fee Only Financial Advisors Help Their Clients?
When you find the right financial advisor, you’ll be able to finally forget about your financial worries and live the stress-free life you deserve. Here are some of the ways Best Fee Only Financial Advisors help their clients.
Expert financial advisors know that earning high returns on your portfolio won’t mean much if you have costs sapping away at your wealth. Though some of these costs don’t seem too significant on the surface, they can pile up to a big loss in the long-term! Best Fee Only Financial Advisors will have the knowledge and experience needed to analyze your finances and discover any hidden costs you can avoid.
This includes margin interest costs, commissions, bond spreads, extra active management fees, and so on. The point is that this isn’t something most of us have knowledge of. We can’t identify all our costs ourselves because we don’t know much about them. A financial advisor can prove effective in these instances.
Eliminating costs is just one of the 5 critical shifts we recommend to investors in our guide as part of our effort to optimize portfolio performance.
Costs aren’t the only problem plaguing affluent investors. Taxes are a big problem for high net-worth and ultra-high net-worth personnel because they qualify for the top tax brackets. They’re charged the highest taxes in every category, so it’s extremely important to eliminate unnecessary taxation areas.
A financial advisor can help you invest in tax efficient securities like municipal bonds or treasury bills. They can also help you optimize your income and purchase timing, asset allocation, retirement plans, and tax filing. Experienced advisors also balance the gains on some securities in your portfolio against others’ losses in a process called tax loss cultivation.
All of these techniques require knowledge, insight, and care. Above all, an effective tax management process is personalized to a particular investor. Just because something works for someone else doesn’t mean it’ll work for you. Best Fee Only Financial Advisors can create customized tax optimization plans that help you protect your wealth.
This concept is vital.
To understand this, we need to take a step back and analyze the goals of affluent investors. Some advisors assume that the goals of an investor can be described by:
- Knowing their return goal.
- Knowing their risk tolerance.
However, the truth is that each investor is a unique individual. You cannot define the goals, priorities, and dreams of a person via an arbitrary number. Not only will that return goal needlessly pressurize you to earn a certain amount, but it will also be unfair to your true goals.
Fiduciary Best Fee Only Financial Advisors, like Pillar Wealth Management, will take comprehensive surveys to describe your goals in terms of what you want your money to achieve for you. This can be
– Lifestyle dreams
– Legacy goals
– Pursuits you care about
– Anything that’s important to you
Once that’s established, we can decide what the optimum portfolio performance must be for you to achieve those goals. A financial plan is then created to make sure that you can balance your risks and returns. This financial plan is geared towards bringing you financial serenity.
This means that you don’t have to ever worry about your finances at all. You can live peacefully in the knowledge that your money is safe and that you have enough money to achieve your life goals.
Hire a Fee Only Financial Advisor
If you’re currently on the lookout for Best Fee Only Financial Advisors, be sure to look out for some of the traits we mentioned above. For example, a wealth manager for affluent investors should be a fiduciary, have cost and tax reduction plans, be able to balance risks and returns, and be able to provide you with financial serenity.
People with $5 million to $500 million could find all that, and more, with a company like Pillar Wealth Management. With over six decades of total experience in serving clients like you, we are well versed in identifying issues plaguing the wealth of affluent investors and providing sustainable solutions. Contact us for a free discussion today.
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