Fee-Based Financial Planner:
The Complete Guide to What We Do
A fee-based financial planner sounds extremely similar to a fee-only financial planner. However, there’s a major difference in how the two earn money. For instance, fee-only financial planners get money directly from their clients and don’t receive other forms of compensation, such as payments from funds providers. While fee-based financial planners also get paid by their clients, they earn money from other sources as well, including commissions from financial products that they recommend and sell to their clients. Note that fee-based financial planners largely earn by the fees paid by a client. However, a small percentage of revenue does come from commissions from selling brokerage, mutual funds, insurance, or other financial products. Make sure you read our in-depth guide for investors with $10 million or more on how to choose the right financial planner.
Fee-only financial planners act as a fiduciary, which means they have to work in their client’s best interests rather than their own. On the other hand, fee-based financial planners are usually held to a lower legal standard, requiring them to recommend and sell financial products that are “suitable” to their clients. At Pillar Wealth Management, we are a 100 percent fee-only wealth management firm, which helps us ensure no conflict of interest in the services we offer. Our financial planners are adept at providing financial planning services to individuals who have liquid investable assets worth $5 million – $500 million.
In this article, we’ll take a closer look at fee-based financial planners, the services they offer, how to choose them, and if they’re actually worth your money.
Table of Contents
Fee-Based Financial PlannerServices
While there is a stark contrast in how fee-only and fee-based financial planners earn money, there is no major difference between fee-only and fee-based financial planner services. Thus, in simple words, both financial planners are professionals who help individual clients and corporations achieve their long-term financial objectives.
Fee-based financial planners carry out their duties by meeting with clients to understand their financial goals, risk tolerance, and life or corporate stages. After this, fee-based financial planners identify a suitable investment category for them to secure and increase their wealth. Additionally, fee-based financial planners also create strategies to assist their clients in accomplishing their key financial goals by allocating their wealth to a diversified group of investments to generate an income.
Some of the services that a fee-based financial planner can provide you include:
- Investment Management
- Wealth Transfer
- Risk Management
- Balance Sheet Optimization
- Retirement Planning
A fee-based financial planner can provide you with any one of the specific services listed above. Or they can create a holistic financial strategy that encompasses all the services mentioned above. Click here to schedule a meeting with one of our financial planners and learn more about the financial planning services we provide at Pillar Wealth Management.
Investment management is all about managing investments and other financial products. Some people feel that investment management only involves acquiring and disposing investments. But, in reality, it’s much more than that! For example, investment management may not only consist of creating a plan or strategy to buy and sell investments, but it may also include tax planning, banking, budgeting, etc.
At Pillar Wealth Management, we have detailed knowledge about the different financial markets and how they work. This helps us to study our client’s investment portfolios and creating specialized plans to increase returns. We have also authored an insightful guide, Improving Portfolio Performance so that you can learn how to achieve the highest investment performance.
Like several high net worth or ultra-high net worth investors, you also might want to transfer a chunk of your wealth to your offspring or other beneficiaries after you reach a certain age. You might feel that this process is fairly simple and easy, but it’s actually quite challenging and filled with various obstacles such as high taxes. Read our book, The Art of Protecting Ultra-High Net Worth Portfolios and Estates – Strategies for Families Worth $25 Million to $500 Million, where we talk about the problems associated with wealth transfer.
Wealth transfer is the process of transferring a part of your wealth, estate, business, etc., to your offspring or other beneficiaries. It combines several tools, including estate planning, trusts, wills, and life insurance. At Pillar Wealth Management, our financial planning services include wealth transfer, where we create comprehensive transference plans to make sure that your wealth gets in the hands of the right people without any exorbitant taxes.
Investments, risks, and returns go hand in hand. If you choose to invest your wealth in a specific area, you are taking a risk. However, the level of risk for each investment is significantly different. For instance, US T-Bills are regarded as riskless investments, whereas real-estate securities are high-risk investments.
Fee-based financial planner services include risk management services to help you invest so that your risks are minimized and your returns are maximized.
Balance Sheet Optimization
To purchase goods and services, you have to convert your real assets to cash. In fact, if you don’t have an adequate amount of cash or liquid assets, you might have to sell your real assets at a significantly discounted price. On the contrary, having high liquidity can expose you to counterparty risk. Thus, to maintain liquidity and lower your risks, you need to diversify your balance sheet properly.
Balance sheet optimization means adapting your balance sheet as your financial situation changes. With this process, your balance sheet will accurately reflect the changing priorities in your life’s journey.
The financial planners at Pillar Wealth Management can study your balance sheet and help you track how much you own in real assets (commodities, properties, and collectibles), financial assets (cash, equities, and bonds) and debt (mortgages, credit cards, and loans). We will perfect your balance sheet to ensure that you have sufficient cash to buy what you need when you need it.
Retirement planning is one of the most important tasks that you have to take up. Because after you retire, you will no longer have an active source of income, and the only income you will be getting is the passive income generated from your investments.
Moreover, like several high net worth and ultra-high net worth investors, you may have certain dreams related to retirement. For instance, you may want to spend your post-retirement life in the countryside or set some new financial goals that you want to accomplish after retirement. Whatever your post-retirement goal is, effective retirement planning can help you achieve it.
At Pillar Wealth Management, we create holistic retirement plans so that you continue receiving an income even after you retire. Our ultimate guide discusses the five critical shifts you need to make to maximize portfolio growth strategies.
There are several fee-based financial planners out there. But if you want to get the best of all the services highlighted above, you should choose the best fee-based financial planner for yourself. So, what to look for in a fee-based financial planner? Well, here’s a list of the factors you should look for in a fee-based financial planner. Alternatively, you can even read our ultimate guide to learn all about the factors you need to look for in the best financial planner.
Experience and Track Record
Experience and track record speaks volumes about a financial planner’s skills and abilities. Rather than looking at what they say they can do in the future, look at what they’ve achieved in the past. For instance, you should see how long they’ve been in the industry. Certain skills and knowledge, such as asset allocation techniques, only come with experience and so, if you want an expert financial planner, make sure they have sufficient experience.
For instance, at Pillar Wealth Management, we have been offering fee-only financial planning services to high net worth and ultra-high net worth individuals for a very long time. Just click here and book an appointment with our experienced team to learn how we can help you grow your wealth.
You should also see the kind of clientele that a fee-based financial planner has been serving, along with experience and track record. Financial planning for high net worth and ultra-high net worth requisites a significantly more complex and different skill set than financial planning for individuals who have liquid assets worth $50,000 or less.
Looking at the clientele of a financial planner will help you ensure that they know how to manage such a large amount of wealth.
Active and Passive Investment Strategies
Active investment management is one where your financial planner makes regular investment decisions – they will buy or sell holding when they think it’s necessary, mostly when they feel they can make a profit on them. While active investment strategies are crucial for creating short-term returns, they can cost you a lot in management fees and taxes.
A passive investment strategy doesn’t require a lot of trading. Instead, it involves investing wealth in certain areas and is viewed as a long-term strategy to grow wealth. When choosing a fee-based financial planner, ensure that they are utilizing the right balance of active and passive investment strategies to fulfill all your long and short term financial goals.
A good fee-based financial planner will not just aim to grow your wealth but will ensure that your wealth grows in a way that minimizes the amount of money you have to send to Uncle Sam. Therefore, you need to make sure that the financial planner you select has a thorough knowledge of tax optimization techniques.
How Do I Choose A Fee-Based Financial Planner?
After you have shortlisted the financial planners based on the factors mentioned above, the next question on your mind would be, “How do I choose a fee-based financial planner?” Well, like always, we’ve got you covered and will guide you on how to choose the right fee-based financial planner.
Look for Reviews
The best way to learn about the best fee-based financial planner is to read online reviews. A simple Google search on the “best fee-based financial planner near me” will reveal several results. Plus, you can even read actual client testimonials of the available fee-based financial planners on websites such as the Better Business Bureau to learn the advantages and disadvantages of using each one.
Speak to them Directly
Before choosing a financial planner, you should schedule a meeting with them and have a detailed chat with them. It would be best if you used this opportunity to ask questions regarding their services, their investment approach, the fixed fee and the percentage commission they’ll be charging. In our guide for investors with $10 million or more, we discuss the important questions you should ask a financial planner before officially choosing them. If the financial planner is able to satisfy your concerns, you should hire them to fulfill your financial planning needs.
Is A Fee-Based Financial Planner Worth It?
Now, coming to the last question of this article – is a fee-based financial planner worth it or should you simply opt for a fee-only financial planner?
While fee-based financial planners can offer the same services as fee-only financial planners, it is highly recommended for high net worth and ultra-high net worth individuals to opt for a fee-only financial planning firm such as Pillar Wealth Management.
If you opt for a fee-only financial planner, you’ll have fewer conflicts of interest than if you choose a fee-based financial planner. For example, a fee-only financial planner won’t advise you toinvest or buy certain financial products because of personal gains. On the other hand, the more financial products fee-based financial planners sell, the more they’ll earn. Thus, it’s possible that their advice may be in their own best interests in some situations, rather than their client’s. Schedule a free meeting with us to know more about our payment structure.
The Bottom Line
Whatever payment structure your financial planner uses, make sure they are a fiduciary. This means that the financial planner is legally obligated to act in your favor. Contrarily, a nonfiduciary only has to assist you in a way that’s deemed “suitable” to your needs.
At Pillar Wealth Management, we offer a 100 percent fee only fiduciary financial planning services to prioritize your interests and build your wealth. Sign up for a meeting with our financial planners to know more about us and how we operate.