Personal Finance

What Is A Fee-Only Financial Planner

By David Krug David Krug is the CEO & President of Bankovia. He's a lifelong expat who has lived in the Philippines, Mexico, Thailand, and Colombia. When he's not reading about cryptocurrencies, he's researching the latest personal finance software. 5 minute read

When it comes to financial advisors, those that charge a fee have a few advantages over those who do not. It will be up to you to determine whether or not to work with one of them.

The counsel of a financial advisor can help you achieve your financial goals. Of course, this advice isn’t free. Financial advisors charge for their services in a variety of ways. There are financial advisers that charge merely a fee regardless of whether they buy or sell assets for you. Here are a few things to consider before hiring a financial advisor.

What is a fee-only advisor?

Investment strategies, asset management, estate planning, and tax minimization are just some of the services that a financial adviser may give to his or her customers. A certified financial planner (CFP) is one type of qualification that financial advisers can have. Financial advisers differ in their training, credentials, the services they provide, and how they are paid.

It is possible for a financial counselor to be compensated only by a fee, a commission, or both. What does it mean to work with a financial advisor that charges solely by the hour? When financial advisor works exclusively for fees collected from their clients, they are considered fee-only advisors. Different types of fee-only remuneration are possible, based on the advisor-client relationship:

  • Proportion of total wealth. The adviser charges a fee based on a proportion of the assets they manage for the customer. Suppose you have $500,000 in assets and want to hire a financial adviser to oversee them for a yearly fee of 1% or $5,000.
  • Assets under management (AUM) fees are a common term for this type of service.
    Hourly. Rather than charging a flat price per consultation, these consultants bill their customers on an hourly basis for their time.
  • The cost is set at a certain amount. When it comes to one-time projects, this might be done in the form of a fixed cost, such as a financial plan for their customer. It might also be a one-time fee for a specific service, such as continuing investing and financial planning guidance.

As a fee-only adviser, you won’t be paid if you sell financial products like annuities or mutual funds. The word “fiduciary” is commonly used to describe fee-only financial consultants. All suggestions from a financial advisor who operates as a fiduciary are made with the client’s best interests in mind first.

For the biggest professional association of fee-only financial advisers, such as NAPFA, all members must sign and repeat NAPFA’s fiduciary oath every year. It begins with these two sentences: “The adviser shall use his or her best efforts to behave in good faith and in the best interests of his or her client. In order to protect the adviser’s objectivity and independence, the advisor must disclose to the client any potential conflicts of interest in writing, both before the engagement and throughout the period of the engagement.

Financial advisors who are paid on a fee-only or commission basis.

A fee-only financial adviser does not get any money from the sale of financial or investment items they recommend to their customers.
A commission-based financial adviser, on the other hand, would make their whole living by taking a percentage of the profits from the financial products they recommend to their customers. Incentives for the sale of financial products are provided by this

Financial advisors who are paid on a fee-only or fee-based basis may seem the same, but they are paid in different ways. “Fee and commission” is a mix of fee-only and commission-based. In the event that a fee is charged for the creation of a financial plan and suggestions are implemented using products for which the adviser receives a commission, this might occur.

If a client has a need for life or disability insurance, or if they are a legacy customer for whom the adviser is still servicing products they sold in the past, an advisor who is fee-only is another option.

A fee-only financial advisor’s advantages

Fee-only vs. commission financial advisors have a variety of advantages, including the ability to avoid conflicts of interest.

Fees that are easy to understand

Generally speaking, fee-only financial advisors’ costs are straightforward and simple for their customers to comprehend. All financial products have no hidden costs. When dealing with fee-only advisors, you won’t have to worry about any conflicts of interest stemming from commissions earned on the sale of financial goods.


For the most part, fee-only financial advisors are held to a fiduciary standard. The costs charged by the adviser are transparent and easy to budget for. The fee-only advice is much like any other service professional, such as an attorney, physician, or accountant. They don’t make money by selling things; they make money by giving advice.

Fewer conflicts of interest

Financial advisors who rely solely or mostly on fees from the sale of financial products have an inherent conflict of interest. Although all financial goods are not necessarily evil, consumers should be wary of advisers who make their living selling financial products to you.

Working with a fee-only adviser has its drawbacks.

Working with a fee-only advisor has a number of pitfalls.

Conflicts of interest

When it comes to conflicts of interest, fee-only advisors aren’t exempt. You may be discouraged from pulling money from your investments in order to satisfy a financial need if your adviser gets paid based on a percentage of your assets under management.

Account minimums

There are certain fee-only advisors that limit the number of customers they can work with on a regular basis. Before they accept you as a customer, they’ll ask for assets worth at least $250,000 and up to $500,000. When it comes to ongoing services, they may charge a flat price or a one-time financial planning fee. Some investors may be unable to afford these kinds of charges. Services with a high price tag

High-cost services

A fee-only adviser’s services may first appear to be more expensive than those of a commission-based advisor, however, this is not the case. Because these costs are paid out of the customer’s personal funds rather than as a commission, the client may see them as a bigger expense.

Pros and Cons


  • A financial product’s commission isn’t factored into the fees.
  • An adviser who makes their living by selling financial products faces an inherent conflict of interest, which is avoided when they do not get any commissions for their services.
  • Fiduciary standards compel fee-only advisors to put their customers’ interests first in every facet of their engagement with them.


  • Some investors may find it prohibitively expensive to work with a fee-only adviser.
  • There may be a conflict of interest when a fee-only advisor’s fees are based on the assets under management of their clients.

How to find a fee-only financial advisor

Finding a fee-only financial advisor is simple if you know where to look. Some professional associations compel their members to serve as fee-only advisors. On the websites of many of these organizations, financial advisors may be found. These are some examples:

  • Garrett Planning Network
  • XY Planning Network

If you come across a financial adviser online, whether it’s from a search engine, a recommendation, LinkedIn, or some other source, make sure you visit their website first. Many financial advisers choose to advertise themselves as fee-only since this is a selling point for them. A broker-dealer platform and not a fee-only model are more plausible if the site mentions “securities sold via” or anything similar.

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