Why Fee Only?
There are three ways to go with a financial advisor. We believe that fee-only compensation is the best way to go. Here’s why.
This is especially important to know: Most financial advisors are not required to act in your best interests. If that makes you nervous, it should.
The way that a financial advisor gets paid for her or his work, plays a large role in whether or not he or she can be completely objective.
Below is a brief breakdown of the three types of financial advisors.
Commission-Only Advisors
A commission-only advisor (a stockbroker, for example) is paid only when he or she makes a sale. Any actual financial advice offered is incidental to the sale of the financial product.
Commission-only advisors are held to something called the suitable standard. That means the products they recommend to you must simply be generally reasonable for you and your situation.
A commission-only advisor isn’t required to tell you their commissions. And they are also not required to tell you about any conflicts of interest that might influence your decisions.
This means that commission-only advisors can sell products that may be best for them, not for you.
Fee-Based Advisors
A fee-based advisor also gets paid by commission. But he or she can also be paid for advice. Typically, a fee-based advisor manages investments on a fee-only basis. But a fee-based advisor also sells financial products, like life insurance or variable annuities. Those products are sold on commission. Similar to a commission-only advisor, a fee-based advisor isn’t required to tell you how much they earn on their commission.
Fee-Only Advisors
As fee-only advisors, we are held to a fiduciary standard. That counts for a great deal for you and for us as advisors. This is the highest standard of care–and trust — in either equity or the law.
Our responsibility — our job — is to serve you and your interests to the best of our ability. This means we’re required to put your interests ahead of our own. And, we’re required to openly disclose to you any conflicts of interests we might have when we make investment recommendations for you.
As fee-only advisors, our compensation comes directly from you. Not from sales commissions. Not from undisclosed fees, or third party agreements. As a result, you can have confidence. The advice we’re offering you is based entirely on you. On your needs and your objectives. Full stop.
It’s only under a fee-only approach that all the incentives line up to protect and grow your wealth.
