By Greg Hart, CFP®
If you’ve spent any time researching financial advisors and their firms, you may have come across the term “fee-only”. You will usually find a fee-only advisor working at a Registered Investment Advisor (RIA) firm. They provide services and planning that, by law, can only be in your best interest. “Fee-only” is a term you should keep your eyes out for when searching for a financial professional.
But what does it mean? And why is it important?
What Does Fee-Only Mean?
Fee-only financial advisors are paid directly by their clients. That means they don’t receive any type of kickback or commission for recommending certain securities or investments. The National Association of Personal Financial Advisors (NAPFA) believes fee-only financial advisors are the most transparent and unbiased advisors you can come by, and when it comes to your money, that’s exactly what you want to look for in an advisor!
Fee-only advisors typically are found at firms that are Registered Investment Advisor (RIA) firms and/or fee-only advisors hold the CERTIFIED FINANCIAL PLANNER™ (CFP®) designation. If your advisor or his/her firm has one, or even better, both of these designations, you can rest assured that they’re fiduciaries and they only have your best interest at heart.
How Are Fee-Only Advisors Paid?
There are a few different ways fee-only advisors get paid. Some popular methods include:
- Flat fee. You pay one flat fee for the services you receive no matter how many hours you spend meeting with your advisor.
- Percentage of assets under management (AUM). You pay a percentage-based fee depending on the value of your investments. This fee is typically around 1% but can vary depending on how much money you have invested with that firm. This fee is typically reduced on a sliding scale as the size of assets grows bigger.
- Hourly. You pay a fixed amount based on the number of hours your advisor spends meeting with you. This is usually tied to specific, short term, project type of work.
Why Should I Work With A Fee-Only Advisor?
If you’re in the market for a financial advisor, a fee-only advisor can make a world of difference in your financial situation while also giving you peace of mind. Here’s how:
1. No Conflicts Of Interest
No matter how pure an advisor’s intentions are, it can be hard to provide unbiased recommendations when they know they’ll get a kickback or commission. But this isn’t the case for fee-only advisors; they have no incentive to persuade you to purchase certain products because they don’t sell any products at all. Instead, they’re solely compensated by you.
2. They’re Fiduciaries
Fee-only advisors are fiduciaries, which means they’re legally and ethically required to act in your best interest at all times. They’re loyal, quick to disclose any conflicts of interest, and only give advice based on your unique situation and goals.
3. You Get Objective Advice
It’s easy to act on emotion when you’re dealing with your own money. When the headlines shout about an imminent market crash, you may be tempted to sell your investments or change your strategy. Or if a family member needs to borrow money and you say yes, even though you worry about how it will affect your financial future. In situations like these, it’s nice to have someone you can go to for objective advice.
Haddon Wealth Management Is Fee-Only!
At Haddon Wealth Management, we have our clients—and our clients only—in mind. We pride ourselves on transparency and objectivity and building lifelong, loyal relationships with our clients so we can help them reach their financial goals.
Whether you have a specific financial concern or need help developing a comprehensive financial plan, we’re here to guide you every step of the way. To get started, call us at (856) 888-1744 or contact us online to schedule a complimentary get-acquainted meeting.
Gregory M. Hart, CFP® is the founder and managing director of Haddon Wealth Management, LLC, a registered investment advisory firm that provides comprehensive wealth management (in-depth financial planning and sophisticated investment management) for clients who value a relationship-driven approach that delivers customized solutions. Based in Haddonfield, New Jersey, Greg works with clients throughout the Delaware Valley, as well as nationwide. To learn more, connect with Greg on LinkedIn, visit our website at www.haddonwealthmgt.com, or call (856)-888-1744 to begin a discussion.