What is Fee-Only?

There are several ways financial planners can be compensated, which can make things confusing.

We work with clients on a fee-only basis, so I thought I’d share a bit more about what that means and how it’s different from other models.

The Fee-Only Model

Fee-only financial planners are compensated in one way only – fees paid directly to them by their clients.

This fee can be based on the amount of assets the advisor manages for you, an hourly fee, or a subscription fee based on other factors like complexity or income. We do not manage assets for clients, so we take a unique approach to determining fees.

Fee-only financial planners do not sell any products – like insurance or mutual funds – and don’t have any restrictions on the types of investments or insurance policies they can recommend to clients. 

The fee-only model is typically thought to be the most transparent way to charge for financial planning services. And it eliminates a significant amount of the conflict of interest that arises when financial planners sell products in addition to giving advice.

Commission Based

Advisors who are commission based make money by selling products they earn a commission on. This could be life insurance, annuities, or investment products like certain types of mutual funds.

Commissions are typically paid by the insurance or investment companies that create the products, so it may seem as though you are paying nothing or very little. But these costs are typically passed down to the consumer in some way – many of these products come with large fees attached. So it can oftentimes be more difficult to determine exactly what you are paying.

Fee-Based

Fee-Based advisors take a bit of a hybrid approach. Typically, they charge a fee based on the amount of assets invested with them. But, they can still earn commissions through product sales as well.

Conclusion

I am of course biased toward the fee-only model. I truly believe that the transparency provided is incredibly important. But, different models can work for different people. The key is to be aware of how you’re being charged and to understand what potential conflicts of interest exist.

Joe Calvetti is a CPA and the founder of Still River Financial Planning, a comprehensive, fee-only financial planning firm that specializes in working with young families and professionals. Click here to learn more about how we work with clients.

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Disclaimer: The information provided above is for educational purposes only and should not be considered financial, legal, or tax advice. You should consult with a professional for advice specific to your situation.

Joe Calvetti, CPA

[email protected] 
Ayer, MA 01432

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