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What is a Fee-Only Financial Advisor vs. a Fee Based Financial Advisor?



Another word for a fee-only financial advisor would be a NO COMMISSION advisor as a fee only advisor can only receive compensation directly from you (like a CPA or attorney) versus being paid by commissions from products they sell.

A fee-only financial advisor cannot receive compensation from a brokerage firm, a mutual fund company, an insurance company, or from any other source than you. This means they represent you and your interests when giving you advice. After all, think about where someone's paycheck comes from, and that will tell you quite a bit about where their loyalty lies.

This fee may be charged as a percentage of the assets they manage for you, and thus debited out of your account each quarter, or it could be a flat annual fee, or hourly rate. These are three of the six ways that financial advisors charge fees.

To find the right fee only financial advisor, go through the seven steps in 7 Steps to Finding the Best Financial Advisor.

Fee-Based Is NOT The Same As A Fee-Only Financial Advisor

A fee based financial advisor can receive fees paid by you, and commissions paid to them by a brokerage firm, mutual fund company, insurance company, or investment partnership.

Even though both fee-only and fee based financial advisors may have accounts they manage where they charge a percentage of the assets they manage, the investments they place inside these accounts can be very different.

Fee-only financial advisors have a fiduciary responsibility to choose investments that are in your best interest. They typically use investments that have low internal expenses such as no load mutual funds, stocks and bonds; investments that have no 12b1 fees.

Dana Anspach, CFP®, RMATM, has been the About.com Guide to MoneyOver55 since 2008. She is the founder of Sensible Money, LLC, and a practicing fee-only financial advisor who specializes in developing retirement income plans for people age 55 or older. You can learn more about Dana in her bio.


Also Known As: fee only financial planner or fee only advisor

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