Fee-Only Advisors: Are They Worth It?
There’s no debate as to whether high-net-worth individuals need a financial advisor or not. They most certainly do as these affluent individuals lack much of the time and skills needed to manage, grow and protect their wealth themselves. However, everything comes down to choosing the right kind of financial advisor. Whether that’s a fiduciary or non-fiduciary advisor, a commission-based or fee-only advisor, you have to choose the right advisor for yourself to actually build a healthy relationship and succeed at all your financial goals. If you are an investor with $10 million or more in liquid assets, we strongly recommend reading this exclusive guide on financial advisors which illustrates the crucial difference between the right and wrong financial advisors.
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At Pillar Wealth Management, we strongly believe in affluent individuals and families working with the right financial advisors. That’s why we strictly cater to wealthy clients who have $5 million to $500 million in liquid assets. In addition to that, we work with a limited number of clients every year and even turn away some clients at times if we can’t provide them with our utmost dedication or if our visions don’t match. Our advisors’ ultimate goal is to help our clients meet all their short and long-term financial goals and attain financial serenity. Set up a free chat with our financial advisors today to see if they match your financial needs.
In this blog, we’ll be discussing what a fee-only advisor is, what the difference is between a fee-only and a fee-based advisor, whether a fee-only advisor is worth it, how much you should expect to pay them, and what other factors you need to consider when choosing a financial advisor for yourself. Let’s get started.
What is a Fee-Only Advisor?
We can’t stress this enough, but finding the right financial advisor is crucial for high or ultra-high-net-worth individuals and families. It is not as simple as searching on the internet or contacting the financial advisor nearest to you.
You have to spend some time understanding the different types of financial advisors out there and then determine which is the right one for your financial needs and goals. This is just as important as developing tailored financial solutions, and you can learn more about it from our guide on portfolio performance.
Only when you manage to find the right advisor for yourself are there any chances that you can actually succeed at fulfilling your financial goals and targets. With that in mind, there are different types of financial advisors you need to consider.
This includes fee-only advisors and commission-only advisors. As the name suggests, one charges a fee and one charges a commission. Fee-only advisors charge you a fee on the services provided. This can be a one-time fee if you choose to avail their services just once. They can charge a fee on an hourly basis for more than one-time consultation.
Finally, some advisors charge a percentage-based fee which is for when you are working with them on a long-term basis. On the other hand, commission-only advisors charge a commission on the products and securities you trade. Any time you buy or sell these products, the advisor earns a commission on them.
What is the Difference Between Fee-Based and Fee-Only?
Besides the commission-only and fee-only advisor, there’s a third type of advisor that is called a fee-based advisor. While they sound similar to fee-only advisors, they are different. Fee-based financial advisors primarily earn by charging you a simple fee for their services.
However, along with that, they may also earn a commission on certain products and assets. Depending on whether they are fiduciaries or not, they might tell you about these commissions, or they might not. As you can probably imagine, a fee-only advisor is the best out of the bunch but if you’re still unsure whether they are worth it, keep reading.
Is it Worth Hiring a Fee-Only Advisor?
You might be still wondering what makes a fee-only advisor worth it or even better than other types of financial advisors mentioned. As mentioned earlier, choosing the right kind of financial advisor is paramount for your financial success and security.
Here are a few reasons why that advisor is often a fee-only advisor rather than a fee-based or commission-only financial advisor. You can also go through our exclusive guide on finding the right financial advisor to learn how important they are for your financial future.
Most fee-only financial advisors are also fiduciary financial advisors. This holds them to a strict standard of care where they must be absolutely transparent in their dealings with their client. As a result, they always act in the best of faith with honesty and trust.
They also have to prioritize their clients’ interests above their own. Even if a certain financial decision poses high risks for them but is in the best interests of their client, they must disclose it.
Moreover, they have to reveal all relevant information to their client, which will help them make more informed decisions. As you can imagine, working with such an advisor is much easier as you can trust them with your wealth and financial future.
No Conflicts of Interest
Unlike financial advisors working on commission, fee-only advisors don’t face any conflicts of interest while working with high-net-worth clients. Commission-only and fee-based financial advisors always face a conflict as they can be tempted to steer their clients towards products that earn them higher commissions even when they are not necessarily the best for their clients.
This can be detrimental for affluent individuals in the long run. For fee-only advisors, there is no such conflict of interest as their higher earnings are directly tied with their client’s financial success only.
Holistic Wealth Management
As mentioned, since their interests are aligned so perfectly, fee-only financial advisors are more focused on holistic wealth management. There are some financial advisors that only focus on one aspect of your wealth, either because of their interests or because of their skills.
However, a fee-only advisor adopts a more holistic approach. Even if they are just offering investment management services, they will consider the tax ramifications of each investment decision and factor in risk management as well.
Similarly, there are wealth managers, who are often fee-only advisors, who manage all aspects of your wealth. They are not just concerned with aggressively growing your assets but also consider your other costs and expenses and focus on protecting your wealth as well.
Learn how else you can grow and protect your wealth by reading our book, The Art of Protecting Ultra-High-Net-Worth Portfolios and Estates – Strategies for Families Worth $25 million to $500 million.
Constant Monitoring and Adjustments
This depends on the type of fee-only advisor as well. For those charging a one-time fee, your relationship will be over after that one meeting. However, for those charging a percentage of your assets and those who work with you on a long-term basis, they will constantly be monitoring and adjusting your financial plan as well.
Again, this is because their success is directly dependent on your success. Therefore, they will make sure you are always on the right path to your goals and will keep adjusting your goals to match any other changes in your life.
When you combine all these factors together, ultimately, a fee-only advisor can help you attain financial serenity. You can completely trust them to make the best financial decisions for you and assist you in reaching your financial goals and life targets as quickly as possible. You are assured of their skills and dedication.
As a result, you don’t have to worry about your financial future or success, and this gives you that much-desired financial serenity in life, for yourself as well as for your loved ones. Connect with our advisors today to talk about how you can attain financial serenity.
How Much Should I Expect to Pay a Fee-Only Advisor?
Since we have been talking about fee-only advisors all this time, we have to talk about what this fee is exactly as well. However, there isn’t any straight answer to this. There are various factors that affect how much you will end up paying your advisor.
Besides that, while it is important to consider this fee, you also have to think about its long-term consequences. With the wrong advisor, this fee will just be another cost you will have to bear. However, if you manage to find the right financial advisor, their fee can be another kind of investment as they will help you efficiently grow your assets.
How much you expect to pay your financial advisor depends on the services you acquire. There are various types of financial advisors such as financial planners, investment advisors, brokers, wealth managers, etc. The more financial services you require, the more you will have to pay for them. For instance, financial planners can charge you around $1,500 to $5,000 for their services.
Similarly, wealth managers who offer a wider range of services can charge a fixed percentage of your total assets. This is usually around 1%, and so, for high-net-worth individuals with $5 million in liquid assets, this can come to around $50,000 every year.
Sometimes, your precise net worth can also play a role. Many financial advisors or private wealth management firms set the limit at $1 million. However, as the net worth of their clients increases, they tend to discount their rates.
For example, at Pillar Wealth Management, our advisors only deal with affluent clients with at least $5 million in liquid assets. Moreover, as clients’ net worth increases or crosses $10 million, we lower our management fees. Set up a free chat with us to learn more about our fee structure.
Another vital factor that affects how much you will pay your advisor is their management style. There are advisors who lean more towards an active money management style, and there are advisors who prefer a passive management style. Both have their own benefits and drawbacks.
An active manager can help you reap high returns in the short run, but they also come with high risks, high taxes, and other costs. On the other hand, passive managers have a more long-term approach and tend to incur lesser costs. Learn more about the impact of management styles from our brilliant guide on portfolio growth strategies.
Other Critical Factors to Consider When Choosing the Right Financial Advisor
As we keep mentioning, finding the right financial advisor is vital, and a fee-only advisor is just one aspect of it. There are various other factors high-net-worth individuals need to consider as well to make sure they find the best financial advisor for themselves. Some of these factors include:
• Tailored Financial Plans
• Dedicated Advisor
• Reviews and Testimonials
You can also check out this extensive guide on choosing financial advisors for high-net-worth investors worth $10 million or more.
At Pillar Wealth Management, we have been working with high-net-worth individuals for more than three decades now. Our services include investment and portfolio management, risk management, tax planning, estate planning and many other wealth management services. We work with our affluent clients and try to understand their deepest financial concerns and their aspirations in life to develop customized financial plans. Plan a free meeting with Pillar Wealth Management today.
To be 100% transparent, we published this page to help filter through the mass influx of prospects, who come to us through our website and referrals, to gain only a handful of the right types of new clients who wish to engage us.
We enjoy working with high net worth and ultra-high net worth investors and families who want what we call financial serenity – the feeling that comes when you know your finances and the lifestyle you desire have been secured for life, and that you don’t have to do any of the work to manage and maintain it because you hired a trusted advisor to take care of everything.
You see, our goal is to only accept 17 new clients this year. Clients who have from $5 million to $500 million in liquid investable assets to entrust us with on a 100% fee basis. No commissions and no products for sale.
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