Fee Only Financial Advisor Near Me: Why and How to Choose One?

Wealth managers and advisors at Pillar Wealth Management have more than 60 years of combined experience working in this industry and dealing with high net worth clients. We provide a range of financial and advisory services, such as retirement planning, investment management, tax planning, and more, to guide our clients toward financial success and security. Be it managing a portfolio or drafting an insurance plan, we care about more than just the numbers and performance. We aim to fulfill your personal goals and targets so that you can live the life you want. 

Read about why performance isn’t everything from our guide on how to improve the performance of your portfolio for multi-millionaires.

In this article, we’ll answer your questions, like “What is a fee-only financial advisor?”, “Should I use a fee-only financial advisor near me?”, “How do I find such an advisor?”, and “How much should I pay them?” Let’s dive right in.

What is a Fee-Only Financial Advisor?

There are several types of financial advisors. There are financial planners, broker-dealers, investment brokers, wealth managers, and a few more. Then, there are the fiduciary and non-fiduciary types. In addition to that, there are also different types of advisors according to how they are compensated. The three main types of financial advisors are:

1. Fee-only
2. Commission-only
3. Fee-based

Let’s see what each of them does.

1. Fee-Only Advisors

As the name suggests, fee-only advisors charge a management fee for their services, and that’s it. The more they help you grow your wealth, the more they earn as well. So, it’s in their best interests to help you succeed as much as possible. However, that’s not all there is to it. Even within the fee-only planners or advisors, there are a few other types, such as:

One-time flat fees

A one-time flat fee means that you pay the advisor only once. You can discuss your financial situation, and they will recommend certain actions or decisions, and that’s where your relationship ends. Then, you’re on your own. This is okay if you’re consulting them regarding some very specific aspect of your wealth or a short-term plan.

However, you can’t simply keep following their recommendations for the next ten or twenty years. Not only will market changes make those suggestions and advice irrelevant, but your own financial situation and needs will also change.

Percentage-based fees

A percentage-based fee is the opposite of a one-time fee. This kind of fee is charged on an ongoing basis where high net worth clients require constant recommendations and management of their finances. Advisors working on a percentage-based fee are actively involved in your financial planning and execution.

They know about your goals and are always adjusting your plan to mirror those goals. For high net worth individuals and families who either lack the time or expertise to handle their own wealth, this type of fee is ideal, and you can learn more about it by chatting with our managers at Pillar Wealth Management.

Hourly fees

The hourly fee is a combination of the fees mentioned above. Individuals can consult with their advisors from time to time and simply pay for the services rendered at that time. Again, it is better than the one-time fee, but it can be quite inefficient and inconvenient as you will have to bring your advisor up to speed every time.

Fee-Only or Commission-Based?

The basic compensation models for financial advisors are as follows:

1. Charging an hourly or a flat fee for the planning services they provide 

Financial planners paid by the hour or by a fixed rate usually set the price based on how long it takes to provide a given service. With hourly fees, customers pay just for work done, allowing them to choose between less comprehensive guidance or more focused financial plans in order to avoid huge expenses. This model is especially ideal for customers who want occasional advice about certain problems, as opposed to ongoing assistance.

On the other hand, a flat fee structure gives the client a clear idea of how much they will have to pay without considering how long it would take. Such a scenario is ideal for holistic financial planning projects where there is a variety of activities over a particular timeline. For the client, it is important to know the total cost at the beginning as this can help them with budgeting.

Specific financial goals or plans are the focus in the case of flat fees, such as retirement planning or investment strategy reviews. With an hourly fee, ongoing relationships can support any change that may occur to financial plans so that the client’s needs and circumstances are met over time.

2. Charging a percentage based on assets under management (AUM)

The AUM model compensates advisors based on a percentage of the value of the assets that they manage for their clients, which is normally around 1%. Advisors are encouraged by this model to maximize returns and grow assets under management since it ties an advisor’s compensation to how well the client’s portfolio is performing. When the value of a client’s portfolio increases, this also increases how much the advisor is paid.

Occasionally, planning and advisory services are included in this model although most of them are aimed at investment management. There are planners who provide holistic financial planning within the percentage AUM fee while others charge differently.

The AUM model is particularly designed for clients who have substantial investment portfolios and want it to be professionally managed to maximize returns while minimizing risks; it may not be cost-effective for clients with small portfolios because the percentage-based fee can represent a large portion of their net worth, particularly if the advisor does not include any other planning services.

3. Earning commissions

Advisors may be compensated by commissions from selling financial products or providing financial services. This system is prevalent for brokers and insurance agents, who deal in certain products including mutual funds, annuities, and insurance policies. This model rewards an advisor with a fee for selling each product or service, hence influencing their choice of what to promote, based on their own personal gain rather than what is good for the customer.

Investors should proceed with caution when dealing with commission-based arrangements and make sure that the advisor gives advice that is really good for them. The main thing is that there should be openness, and customers should demand information about possible conflicts of interest and advisor compensation for suggested products.

4. Being compensated through a combination of fee types

This fee-based compensation framework combines attributes of fixed charges, AUM costs, and commissions. It allows advisors to propose a wide range of services depending on the customer’s requirements. Chronologically, an advisor may charge a fixed price for an initial financial plan while taking a certain AUM-based percentage for further investment management; then, the advisor may be compensated through commissions for insurance product sales.

This model is an option whereby the financial advisor and the client have some freedom of action regarding financial planning and advisory services. Clients can derive benefits from various services including elaborate financial planning and investment management in addition to purchasing financial products. With different types of compensation, an advisor’s income can be linked to the client’s objectives thereby fostering comprehensive financial management.

But it is important for clients to know that there are conflicts of interest in the fee-based model. The client should know how much the advisor is paid for each service component and also be sure the advice given is unbiased and serves the client’s best interest. In order to create a trusted advisor-client relationship, the advisor should be transparent in disclosing their charges and the services involved.

There is a debate about what fee-only compensation means, especially about whether it includes charging based on AUM. Nevertheless, the majority think that fee-only signifies being compensated from flat, fixed, hourly, or percentage-based fees.

Many people in the industry believe that AUM-based advisors should be considered fee-only despite the fact that they charge differently depending on your portfolio size. Hence, charging based on AUM may affect the advisor’s approach to growing assets by influencing their emphasis. There is a debate in the advisory field regarding which types of fees actually qualify for a fee-only model including AUM fees or not.

The importance of fee-only compensation lies in its transparency and conformity with what the customer needs. Since fee-only advisors charge either hourly, fixed, or percentage-based fees, they can offer impartial financial advice and planning services, as a result creating trust-based relationships with their clients.

Advantages of a Fee-Only Financial Advisor

Eliminating potential conflicts is possible by choosing fee-only advisors because they do not rely on commissions made from selling financial products to clients.

A potential client must consider whether an investment advisor’s financial recommendations are guided by their own profit motives or are customized to be in your best interests.

Some registered representatives and advisors earn commissions from pushing products sold by their employers even though these products may not be in line with the most appropriate strategy for your portfolio.

A fee-only advisor’s primary focus is your best interest

A fee-only financial planner or advisor has a legal obligation, called the fiduciary standard, to always act in the best interest of their customers, which guarantees that customers are given impartial and subjective advice that is consistent with their personal financial situation and goals. The fiduciary standard is starkly different from the suitability standard in that the latter merely mandates that a planner’s suggestions should be suitable for the client, although not necessarily the best available option. This clear difference ensures that a fee-only financial planner will focus on the needs of clients.

Marianela Collado, CEO and senior financial advisor at Tobias Financial Advisors in Plantation, Florida, explains that their level of recommendations surpasses that of the suitability standard. The recommendations made under the suitability standard may be influenced by the financial interests of the advisor, leading to a compromise in the quality of the advice. In contrast, fee-only advisors seek to offer the highest quality advice or service because their remuneration is tied directly to the client’s success as opposed to selling securities.

Collado further highlights the fact that the higher quality of care connected with fiduciary duty is mainly attributed to the payment arrangement of fee-only financial planners or advisors. She explains, “This enhanced quality of care originates from the fact that all their earnings and remuneration come from the client.” By having a transparent compensation structure, these advisors don’t have other motives, such as receiving incentives or kickbacks from other products. Their only income is their clients’ fees, which ensures that their objectives are always aligned with those of the clients they serve and creates a sense of trust as well as openness between them.

Fee-only financial planners or advisors commit to ongoing education and professional development to stay abreast of changes in financial regulations, products, and strategies by adhering to the fiduciary standard. The quality of the advice they provide is further enhanced by this ongoing education, ensuring it remains relevant and effective in helping clients achieve their financial objectives. Advisors must ensure their advice is in the best interest of the client, given their specific circumstances.

You know what you’re paying for

When hiring a financial advisor, transparency regarding how they are paid plays an important role. For one thing, you’ll know exactly what you’re paying for; this may be a percentage of assets under management (AUM), a flat planning fee, or some other agreement between the parties. You can judge whether the services provided are worth their cost because all the charges are transparent. An invoice from a fee-only advisor always describes all the work done and how much it cost, fostering trust.

Unlike fee-only agreements, commission models can sometimes hide the real expenses associated with financial advice. The charges are incorporated in the securities and financial products you purchase, hence identifying the specific services you paid for is rather more strenuous under this arrangement. It may be challenging to evaluate the contribution made by the advisor, and you may end up being uncertain about the value they add to the product sold due to this form of payment.

San Francisco-based Human Interests Advisors’ investment manager Ronnie Cox emphasizes a significant element in models that base payments on sales: “These fees are usually fixed according to the type of a good; therefore, there might be constraints concerning pricing and distribution patterns.” Such pressure on costs has resulted in most investment managers not being able to adjust their charges while meeting your individual requirements, given the fixed commissions dictated by investment providers. As a result, it might be more difficult for customers to assess the cost-effectiveness of the advisory relationship under a commission-based model.

When comparing fee-only and commission-based models, you should take into account your feelings with respect to how much control you have over the cost of professional money management. Fee-only advisors provide a simple, accountable way of charging fees, which fosters relationships founded on confidence and understanding because the advisor’s goals match your objectives. On the other hand, a commission-based advisor uses product commissions for payment instead of collecting fees directly from clients, However, this presents conflicts of interest since some advisors may recommend certain products just to earn more commission even if their customers should be considered while making decisions.

You should understand each model thoroughly before making any decisions that could affect your financial situation.

Fee-only advisors take a big-picture approach

You should select an advisor that can help you create a financial plan as well as update it on a regular basis, adjusting your asset allocation to suit that plan. The advisor will modify your plan as your financial situation changes, enabling you to achieve your set targets. To cope with income and expense fluctuations and life transitions, a comprehensive plan is crucial. It offers a flexible approach that develops with time.

According to Stephen Kates, a certified financial planner and a principal financial analyst for Annuity.org, fee-only financial planners and advisors that take an all-inclusive approach to financial planning are the most beneficial; they address a broad range of fiscal topics, and all your financial issues are considered thanks to this broad spectrum.

Budgeting and money management are crucial to your financial well-being, and a financial planner can assist you with this undertaking. When you consider retirement planning, for example, your advisor can help you determine how much you should save as well as strategies for saving more while also having the right retirement accounts. Your advisor will help you decide when to apply for Social Security benefits and how to ensure you have a sufficient income stream throughout your retirement years. Your advisor will assess your insurance needs, ensuring you have enough coverage and suggesting changes where necessary.

An estate plan with investment strategies is key to a complete financial plan. The advisor will assist in drafting or revising your estate plan to reflect your desired distribution of assets with minimal tax effects.

Some advisors specialize in tax consulting, offering ideas on how to minimize taxes by investing wisely and planning prudently for retirement. Every aspect of your financial situation can be integrated into a comprehensive plan consistent with your goals and financial needs.

Potential drawbacks of fee-only financial advisors

Even though the fee-only structure tends to be more transparent and customer-oriented than the commission-based one, it has some disadvantages. It is meant to reduce conflicts of interest arising from charging fees for selling products.

“The thought behind fee-only is that it prevents conflict of interest; however, depending on how they are paid—this can either be by charging a flat dollar sum per service provided or as a percentage of the service fee, financial advisors could get into conflicts,” Collado says. The implication of this statement is that even though fee-only financial planners or advisors do not make money from selling investments or insurance policies, their fee structure could still compromise their recommendations. A flat fee might appear simple, but an advisor may still favor some strategies over others that are more in line with what they charge.

Consider, for example, an advisor who gets a share of the assets they manage as payment. This may result in issues where a customer wants to sell some securities to pay off a house loan or fund a major life event. Their advisor might not be quite comfortable proposing such a line of action since it would reduce the total value of the managed funds, consequently lowering the advisor’s income. The objectivity of the advisor’s recommendations may be affected by this subtle bias.

In order to avoid such potential pitfalls, clients should engage in frank and open talks with their advisors on their fee structure side along with the reasoning used behind what they recommend. Understanding the advisor’s payment model and its impact on the advice given can be an influential factor in maintaining a trust-based relationship while expecting advisors to serve the client’s welfare as much as possible. Clients can protect their financial well-being and make better decisions by staying informed and asking questions about the advice they receive.

Should I Use a Fee-Only Financial Advisor Near Me?

1. No Conflicts of Interest
2. Expertise
3. Range of Services
4. Expense Management
5. Constant Evaluation and Adjustments

A financial advisor can be incredibly convenient, if not absolutely necessary, for high net worth individuals. Moreover, when it’s also a “fee-only financial advisor near me,” you can rest assured that your financial planning and decision-making are in good hands. Here are five reasons why you should definitely use a “fee-only financial advisor near me.”

1. No Conflicts of Interest

As mentioned earlier, with other types of financial advisors, there’s always the risk of conflicts of interest. They might be interested in growing their wealth more than yours. However, with a “fee-only financial advisor near me,” your advisor’s interests align with your interests, so you can expect them to work for you without any conflict of interest.

The more they help you, the more they help themselves. With a conflict of interest, your advisor will simply be leading you to an uncertain retirement and financial position. Find out why and some other signs of a bad financial advisor by reading our exclusive guide on how to choose the best advisor for your needs.

2. Expertise

Financial advisors also tend to have a lot of knowledge and expertise in wealth management and other financial services. They know how to handle large portfolios according to the clients’ goals and targets, develop elaborate retirement and estate plans, protect clients’ assets, minimize their expenses, and a lot more. They know all the ins and outs of the industry and know exactly how to capitalize on market opportunities.

3. Range of Services

Depending on the type of financial advisor you choose, you can expect them to be familiar with and offer guidance regarding a wide range of financial and wealth management services. Instead of going to several different people for different services, you can expect financial advisors like wealth managers to look after all aspects of your wealth and assets.

Wealth managers and advisors at Pillar Wealth Management are experienced in providing financial services such as risk management, investment management, retirement planning, tax optimization, and more. Learn about the full range of our services by contacting one of our advisors.

4. Expense Management

A “fee-only financial advisor near me” can help you minimize your expenses. So, if that’s one of your concerns, you should definitely use a financial advisor. Their extensive expertise allows them to adopt smart strategies that help keep your expenses, such as taxes and internal costs, low while maintaining high returns from your investments.

Moreover, they keep you in the loop regarding the expenses you can expect and what you can avoid. For more insights like these, order a free copy of our book, The Art of Protecting Ultra-High Net Worth Portfolios and Estates – Strategies for Families Worth $25 Million to $500 Million.

5. Constant Evaluation and Adjustments

As we said earlier, times are always changing. What might seem like a good strategy right now might become obsolete within the next five to ten years. Therefore, even if you have created a comprehensive financial plan with your advisor, you can’t just stick it in the drawer and blindly keep following it.

As the industry evolves, market conditions shift, and as your own financial situation and goals change, you will want to adjust your financial plan accordingly. A financial advisor can keep an eye on these changes and make necessary adjustments as needed.

How Do I Find the Right Fee-Only Financial Advisor Near Me?

1. Reputation and Credentials
2. Experience
3. Personalization

Understanding why you need an advisor is probably the easy part. You must be convinced and thinking, “How do I find a fee-only financial advisor near me?” Well, here’s where it gets tricky. It’s easy to find a financial advisor, but what you need is the right financial advisor for you. Here are a few ways you can find one. If you want to learn about it in more detail, go through our extensive guide on finding the right financial advisor for investors worth $10 million or more.

1. Reputation and Credentials

Reputation can tell you a lot about how good a financial advisor is. Don’t just take their word for it when they say they are the best or they can make you the richest person in the world. Simply look at their reputation. Also, check their credentials, certifications, and other details through a proper background check.

2. Experience

Even if they have an excellent reputation and all the right credentials, there are some things that only come with the right experience. Therefore, make sure they have adequate experience in the industry, offering those specific services, and most importantly, working with high net worth clients specifically.

3. Personalization

The right advisor for you will be concerned about your goals and targets. Accordingly, they will spend time understanding your needs and coming up with personalized financial solutions.

How Much Should I Expect to Pay a Fee-Only Financial Advisor Near Me?

1. Management Fee
2. Money Management Style

You’ve decided to go with a “fee-only financial advisor near me,” but you still need to understand how much you will pay. There are two aspects to this.

1. Management Fee

As a simple fee, you can expect to pay a percentage of the value of the assets under management (AUM). Usually, this percentage is around 1%. However, depending on various factors, this can also go over 2% or fall to less than 0.5%. These management fees also tend to drop lower as net worth increases.

2. Money Management Style

How much you should expect to pay your “fee-only financial advisor near me” also depends on their money management style. Certain styles call for a lot of active involvement, regular execution of transactions, and constantly watching the market. This active management leads to higher management fees. In comparison, some advisors adopt a more passive approach and proceed with things slowly but carefully.

As a result, they charge a much lower fee. So, ultimately, how much you should expect to pay depends on a few factors. You can learn more about the impact of these management styles by reading our handy guide on the shifts you must make to maximize the growth of your portfolio. Alternatively, you can get in touch with our advisors and get your questions answered directly.

Learn More About the Fee-Only Model   

Various organizations provide information about compensation models, such as the National Association of Personal Financial Advisors (napfa.org), the Certified Financial Planners Board (cfp.net), and feeonlynetwork.com. 

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