Personal Finance
What Is a Fee-Only Financial Planner?
The fees financial advisors charge may be less than most people think, and the insights they add may surpass an advisor's cost.
If you’re in the market for financial advice, you may come across several different types of financial professionals willing to offer their services and expertise.
However, it can be important to pay attention to how they’re compensated, as it may affect the type of advice you ultimately receive.
If a financial planner, financial advisor or another type of financial professional is fee-only, that means they receive compensation solely from the fees clients pay for their services. They also may be fiduciaries, bound to work in your best interest.
The fees financial advisors charge may be less than most people think, and the insights they add may surpass an advisor's cost.
In fact, SmartAsset’s latest proprietary model reveals that working with a financial advisor could potentially add from 36% to 212% more dollar value to investors’ portfolios over a lifetime, depending on multiple unique, individual factors.¹
SmartAsset's no-cost tool can help you find and compare vetted fiduciary financial advisors.
The fiduciary financial advisors you match with serve your area and are legally bound to work in your best interest. You may even be able to instantly connect with an advisor for a free introductory call. Advisors are vetted through our proprietary due diligence process.
What Is a Fee-Only Financial Planner?
By definition, fee-only financial planners are financial advisors who operate on a fee-only basis to create budgets, plan retirement, pay down debt and help you set goals to reach other financial milestones.
They collect fees from only you, generally as a percentage of your assets under management (AUM).
Fee-only advisors don’t receive fees, commissions, referral fees, kickbacks or any other hidden forms of compensation. They are also often registered investment advisors (RIA) with either the U.S. Securities and Exchange Commission (SEC) or a state-level institution.
This payment structure may help reduce the chances an advisor will encounter a conflict of interest, which they’d be obligated to disclose.
Fee-only financial planners also don’t earn additional compensation by recommending one investment product, insurance product or service provider over another.
Fee-only financial planners and advisors work according to their fiduciary responsibility, meaning they must act in their client’s best interest.
Click here to get matched with a vetted fiduciary financial advisor.
Pros and Cons of Fee-Only Financial Planners
Cons
Higher Fees: Fee-only financial planners or advisors may charge higher fees compared to commission-based advisors, who earn money by selling financial products. Since fee-only advisors do not receive commissions, their management fees may be set at a higher rate compared to the potential earnings of commission-based advisors.
Fewer Services: A fee-only financial planner may offer fewer services than someone who earns commissions for selling insurance or trading securities. In that particular case, you may have to work with a separate financial professional for trades and purchasing insurance products.
Pros
Fiduciary Duty: Fee-only financial planners and advisors work as fiduciaries. This means they are legally bound to work in your best interest.
Their success is based on how well their advice may benefit you and your investments.
It’s important to understand your needs and what any potential advisor candidates may be able to provide before signing on with one.
What Do Fee-Only Financial Planners Charge?
The most common way fee-only financial planners or advisors charge is a percentage of the client’s AUM, the funds they're responsible for handling.
Another method is to charge an hourly or monthly rate. Other fee-only advisors may charge clients a flat fee or a service-based fee depending on specific needs.
The exact cost of a fee-only financial planner will likely depend on a combination of how they charge clients, the services you require and your location. More experienced advisors may charge higher fees, as well.
This free quiz will match you with vetted fiduciary financial advisors in just a few minutes.
Fee-Only vs. Fee-Based Financial Advisors
While the term “fee-based” can often be confused with fee-only, fee-based advisors may operate much differently.
A fee-based advisor may receive normal advisory fees from clients, just like a fee-only advisor, but they are not held to a fiduciary standard.
Instead, fee-based advisors may only be required to meet what is called the “suitability standard.”
This requires only that investments be suitable to the investor’s circumstances and may allow an advisor to recommend an investment that is more costly and generates a higher commission than a similar low-priced option.
In many cases, these commissions come from the advisor’s role as either a representative of a broker-dealer or an insurance agent.
How to Find a Fee-Only Financial Planner
Ultimately, choosing which type of financial advisor to work with comes down to what's best for your individual financial situation. If you’re looking for a financial advisor obligated to work in your best interest, a fee-only financial planner or advisor may be a good choice for you.
Finding a fiduciary shouldn't be that hard. Thankfully, now it isn't.
SmartAsset's free matching quiz helps Americans get matched with fiduciary financial advisors who serve their area so they can compare and decide which advisor to work with. All advisors on the matching platform have been vetted through our proprietary due diligence process.
The quiz takes just a few minutes, and in many cases, you can be connected instantly with an advisor to have an introductory call.
Click Here to Get Matched With Vetted Financial Advisors
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This is not an offer to buy or sell any security or interest. All investing involves risk, including loss of principal. Working with an adviser may come with potential downsides such as payment of fees (which will reduce returns). Past performance is not a guarantee of future results. There are no guarantees that working with an adviser will yield positive returns. The existence of a fiduciary duty does not prevent the rise of potential conflicts of interest.
SmartAsset.com is not intended to provide legal advice, tax advice, accounting advice or financial advice (Other than referring users to third party advisers registered or chartered as fiduciaries ("Adviser(s)") with a regulatory body in the United States). The article and opinions in this publication are for general information only and are not intended to provide specific advice or recommendations for any individual. We suggest that you consult your accountant, tax, or legal advisor with regard to your individual situation.
SmartAsset Advisors, LLC ("SmartAsset"), a wholly owned subsidiary of Financial Insight Technology, is registered with the U.S. Securities and Exchange Commission as an investment adviser. SmartAsset’s services are limited to referring users to third party advisers registered or chartered as fiduciaries ("Adviser(s)") with a regulatory body in the United States that have elected to participate in our matching platform based on information gathered from users through our online questionnaire. SmartAsset receives compensation from Advisers for our services. SmartAsset does not review the ongoing performance of any Adviser, participate in the management of any user’s account by an Adviser or provide advice regarding specific investments.
We do not manage client funds or hold custody of assets, we help users connect with relevant financial advisors.
Sources:
1. “The Value of a Financial Advisor: What’s It Really Worth?” SmartAsset (Nov. 2024)
