Fee-only vs. Fee-based: Is There a Difference?

You bet there is; and it could cost you! The financial services industry seems to be laden with jargon and titles that sound similar, but in reality have very different meanings. It can be very confusing for clients. When it comes to your adviser, you need to know the terms fee-only and fee-based because it determines how the adviser is compensated.

Generally speaking, fee-only financial planners may be registered investment advisers, and should act as a fiduciary in the client's best interest. Fee-only advisers do not accept any fees or compensation based on product sales, i.e., no commissions. Fee-only advisers are viewed as having fewer conflicts of interest, and are seen as providing more comprehensive advice.

Conversely, a fee-based adviser may not always disclose how they are compensated to a client. Many fee-based advisers do offer hourly fee service but they also offer commission-based products (insurance, annuities, etc.) to clients. Fee-based advisers may not disclose that they will receive a commission based upon their recommendations. Further, fee-based advisers generally have to work in their firm’s best interest first, and not necessarily the client’s. Conflict of interest, anyone?

Yes, I am biased in favor of the fee-only model. Many fee-only planners have also obtained the Certified Financial Planner™ designation and act as a fiduciary for their client. However, you do not have to be fee-only to be a Certified Financial Planner™.  If you would like to learn more about fee-only planners, you can research the following websites for information and use their Find an Adviser function:  National Association of Personal Financial Advisors (NAPFA), the Garrett Planning Network, or the Certified Financial Planner Board of Standards.

For disclosure, I am not a member of NAPFA or Garrett Planning Network. I am however, a fee-only, independent CERTIFIED FINANCIAL PLANNER™.  I can help you with financial decisions, budget for debt, save or invest for retirement, investment allocation and more. Contact me and let’s get started. #talktometuesday #getstarted #HowIcanHelpYou #GetHelp #Hireaplanner #feeonly #feebased #commission #fiduciary