First, let’s talk about what it means to be a fee-only advisor. A fee-only advisor is compensated solely by the client. They may receive no sales-related compensation, like commissions, transaction fees, or referral fees. Instead, a fee-only advisor may receive compensation in these ways:
- Percentage of Assets under management (AUM)
- Monthly, Quarterly, or Annual fees for ongoing planning
- Hourly fees
- Flat rate, Project-based fees
In contrast to a fee-only advisor, a fee-based advisor may receive sales-related compensation from commissions from product recommendations, revenue-sharing agreements, or referral fees. Here, I’m not implying that a fee-only advisor is a better option than working with a non-fee-based advisor. Instead, I believe it is important to inform consumers about how advisors get compensated to determine any potential conflicts of interest personally.
Admittedly, I am biased towards working with a fee-only advisor due to my experience working at a fee-based firm, where the volume of solutions and the solutions implemented measured success. I started VenWealth in a similar fashion because I wanted to shift my time and focus to working more closely with clients and providing pure advice with minimal conflict of interest. If you’re ever unsure how an advisor is paid, a quick search for their ADV Brochure will shed light on their fee structure and how they are compensated. Also, don’t be afraid to ask!
Schedule a free virtual consult with Pete!
Article written by Peter Kim, CFP® on April 19, 2022