What is a Fee-Only Financial Advisor and Should You Use One?


If you are investing using a financial advisor, you need to know they have your best interests at heart. With any financial endeavor, the goal is obviously goals-based growth and protection of your assets. How that growth is achieved, however, is often ultimately left at the discretion of the financial advisor. What motivates a financial advisor, then, is important to understand. Before you decide to use a financial advisor, you need to ask some crucial questions.

  • How does this financial advisor get paid?
  • Do they have financial products they want to sell you?
  • What is their investment philosophy and why should you trust it?
  • Are they acting as a fiduciary on all of your accounts at all times?

In this article, we’re going to explore that first question a bit closer: how a financial advisor gets paid. 

Most financial advisors are paid on some combination of a fee earned based on the balance of your account and commissions earned from the sale of financial products or transactions. 

However, you have the opportunity to choose a financial advisor – like us – who operates on a fee-only basis.

Let’s take a closer look at a fee-only financial advisor and whether or not you should use one.

What is a Fee-Only Financial Advisor?

A fee-only financial advisor is someone who has taken a fiduciary oath to put your interests first at all times, on all of your accounts and in all interactions. That means our clients never pay commissions, and there are never any front-end or back-end costs or hidden fees. In other words, we are compensated only from what you pay us, and not by any other banks, brokerages or financial institutions who might have an interest in the transaction.

One of the main reasons many investors prefer using a fee-only advisor like us is because of the trusted nature of the relationship it creates. There are no hidden fees and no conflicts of interest that commission-based or fee-based advisors face. Meaning, there are no outside forces or relationships with any other professionals or institutions impacting the transaction with you. We have no products to sell you, we simply earn our fee – from you – to give you the best advice we know how to give. 

This puts your needs at the forefront of the relationship. Your goals and interests come first. We give you the advice we ourselves follow, and if that advice involves you purchasing financial products such as insurance products or estate plans from an attorney, you can be confident we earn no money from making that recommendation. 

In this way, the financial advisor can help you, the client, choose the products that are best suited for you and your goals. 

How do Fee-Only Financial Advisors Get Paid?

There are several ways a financial advisor might get paid. As mentioned earlier, the most common method in the past was through commissions or referral fees. However, that created a bias in favor of financial product companies instead of the client. 

A fee-only advisor can get paid several different ways:

Flat Fee

One way a fee-only financial advisor gets paid is by a flat-fee or tiered fee. This is often an annual fee charged by the advisor. Sometimes, the financial advisor may have asset minimum requirements, but not all.

Hourly Fee

This is fairly straightforward. The financial advisor would charge an hourly fee to provide advisory and investment services.

The Most Preferred Fee-Only Method: Percentage-Based Fees

While fee-only financial advisors provide an array of fee types, the one most preferred by higher net worth individuals is a percentage-based fee.

A percentage-based fee is determined from the total balance of the accounts that we manage on your behalf. A common fee percentage is 1%. This method tends to link you and your advisor’s fates together. When you succeed, they succeed. 

As opposed to earning commissions, where an advisor sees an immediate return from selling you a specific product, we feel good about the percentage fee model because it motivates us to help grow your investments. 

High net worth individuals often prefer to work with tiered-fee advisors who charge a percentage of assets under management because of the complexities involved in managing higher levels of wealth. This may include working closely with the client’s attorney, CPA, or any other advisor to make the best decisions.

These types of advisors are willing to put in the effort to plan, manage, and grow their client’s wealth regardless of the challenge. 

A Costly Mistake: Fee-Only vs. Fee-Based

Don’t confuse fee-only advisors with fee-based advisors. Fee-only advisors charge a specific fee for the services they provide. Fee-based advisors charge a fee for services but can get paid on commissions as well. This type of advisor is not a fiduciary, meaning they don’t necessarily have your best interest at heart and are held to a much lower standard in a court of law. If you are looking for a strictly fee-only advisor, make sure you clarify this important distinction.

Why Use a Fee-Only Financial Advisor?

The first main reason to use a fee-only advisor is that their highest priority is you. They are not incentivized to sell products pushed by a certain company, but products that are best suited for you and your goals. This is especially true if the advisory is a fiduciary, who is legally required to act in your best interest. 

You can also use a fee-only advisor to help you better plan financially. Since they offer an objective opinion not motivated by any commissions, you can trust their advice. They can be a great resource to help with a full financial plan or a simple financial review. Make sure you understand if this type of service will come at an additional cost. 

Overall, fee-only financial advisors often have a much wider range of financial products and services they can offer their clients. Since they aren’t tied down to any products or companies, they can choose the ones that best suit your needs. 

A Fee-Only Financial Advisor You Can Trust

Not sure who to trust with your financial management? Want to partner with someone who only wins when you win? 

Talking to a fee-only fiduciary financial advisor can help you better understand the different investment strategies available to you and which one is the best choice. Contact us today to see how we can help you reach your financial goals. 


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