What is Fee-Only Financial Planning?
What if someone told you that when searching for a financial planner, one of the most important things to consider is the way in which he or she is compensated? One does not always think about the inherent conflicts of interest that arise in a professional’s compensation, but the truth is that it can stand in the way of you receiving objective advice. The three types of compensation most apparent in the industry are:
- Commission-Based (paid for selling financial products such as insurance and annuities)
- Fee-Only (charging a yearly fee based on the amount of assets being handled by the advisor)
- Fee-Based (A combination of receiving commissions for products and charging a fee for assets managed)
The reason people seek professionals, such as doctors and lawyers, is for a trusted second opinion about, and potential solution to, one’s situation. Difficulties may arise when one has financial incentives that could cause him/her to not act in a client’s best interest.
With Fee-Only financial planners, on the other hand, “All Potential Solutions are on the Table”. The interest of the client is tied to the interest of the advisor, so you can rest easy knowing that you have a friend and trusted confidant dealing with your dreams and life’s work.
According to CFP Board demographics there are currently 76,724 certified financial planners. Though not each of these financial planners get paid similarly. A fee-only financial planner is compensated for advisory and wealth management services not through the commission of other sources including by the companies and financial products they may recommend, but are paid directly by their clients on a transparent and pre-arranged payment plan. This can be an hourly or project rate, monthly retainer, or percentage of the investments managed.
When working with a NAPFA Registered Financial Advisor like ourselves, there are no hidden fees, commissions, third-party payments, or product sales.
Have more questions?
Watch the video below or contact us to talk more.