A fee-only financial advisor can only receive compensation directly from you.
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.
This is different than a fee based 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.
