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What the Difference Between Fee-only or Fee-based Financial Planner

Updated on October 1, 2010

Certified Financial Planner

What the Difference Between Fee-only or Fee-based Financial Planner

What the Difference Between Fee-only or Fee-based Financial Planner

It must be confusing to the consumer or investor as how the lines are being drawn between the various financial professionals and what exactly they offer.

We have financial planners, certified financial planners, charter financial consultant, financial consultants, registered financial advisors, independent broker-dealer advisors, insurance agents and registered representatives typically working for the various brokerage firms.

Some professionals sell products such as stock, bonds and insurance related products and receive commissions. Others offer only advice and charge an hour or flat fee for their advice, some charge a fee based on assets under management and then there are those that combine any other the previous elements into their services.

What is the distinction between fee-only and fee-based?

A fee only advisor is compensated by an hourly, flat rate or percentage of assets under management and receives no commission from the purchase of any financial trading products such as stocks, bonds and mutual funds.

A fee based planner is compensated both by fees paid by a client and commissions that based on the purchase or sale of an investment product.

Which ever type you choose, be sure that they will have your best interest at heart. Having a conversation as to how they operate and how they are paid will assure a better fit between planner and client.

As a client will you need ongoing research and strategic adjustments to your investment portfolio? Determine what your expectations are, how much communications will be required between yourself and planner to help in the process of choosing the right individual for you.

Which is best fee only, fee based or even commission only can be debated. As a fee only certified financial planner I certainly have my bias. More importantly is rather you feel comfortable with your choice and share full communications between you and your planner.


Which do you prefer

When chosing an advisor which do you prefer?

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