Fee Only Advisors

Fee only advisors offer many benefits to clients who decide to work with them instead of commission advisors.

Because while all financial service isn’t free, there’s a difference between paying someone who has your best interests in mind and someone who has their company’s best interest in mind.

The relationship, decisions, and outcome can be completely different depending on who you work with.

For example, wouldn’t you want a financial planner who has a genuine desire to grow your retirement account as much as possible? Wouldn’t you want someone who lays out all the different options to decrease taxes? Wouldn’t you want someone who does what’s best for you instead of what’s best for them?

If you want that and more, it’s time you learn about fee only advisors so you can increase your bottom line and not theirs.

Fee Only Advisors

Fee-only financial planners are registered with the either SEC (Securities and Exchange Commission) or the state in which they operate and have a fiduciary responsibility to act in their client’s best interest. They are officially labeled a Registered Investment Advisor or RIA. The law requires that RIAs be held to a Fiduciary Standard.

Fee-only advisors do not receive fees or compensation based on product sales and are required to put their clients’ needs before their own. This is a big advantage for clients who work with them.

Fiduciary advisors are held to a “duty of care” and continually monitor their client’s investments and evolving life. The objective of fee-only advisors is to have fewer conflicts of interest, and provide more holistic advice. This requires the advisor to act solely in the best interest of the client always.

They are also required to disclose any conflict of interest, adopt a code of ethics, and fully explain how they are compensated. The theme of the relationship is total transparency, and nothing less. And clients appreciate it compared to secrecy or being taken advantage of.

Understanding The Difference In Financial Planners

Only a small percentage of financial planners are RIAs. Most financial advisors are like broker/dealers and are not held to a fiduciary standard; they are instead, held to a lower suitability standard. This is very important because law requires them to act in the interest of their employer, and not in your best interest as the client.

So to be clear, these brokers could recommend their employer’s mutual fund because they’ll receive a commission and their company will gain more capital. That could be their sole two reasons for their recommendation, and neither have any focus on helping your financial status.

Although many brokers try to balance both their company interests and their client’s interests, when push comes to shove they have to prioritize their employer. And out of the thousands of brokers, there are certainly a few bad apples out there looking to rip off clients for their own profit. So be careful who you work with.

On the opposite side of fiduciary is what’s called suitability standard, which brokers are held to. Currently brokers are still allowed to operate under a suitability standard but only until they’re required to declare themselves as a fiduciary under the Department of Labor ruling. Suitability means that the broker only must prove the product purchased by a client was suitable for that client at the time of purchase.

A Holistic Financial Process

For a fiduciary financial advisor, the first meeting is only the start of a comprehensive financial plan that both the advisor and client will constantly work on executing. Holistic financial planning is the process of meeting your life goals through the appropriate management of your resources.

During this holistic process, your advisor will get to know you and your financial picture. As a team, you will define your life goals and get a better understanding of your lifestyle and aspirations so your advisor can develop a comprehensive plan to keep you on track for your goals.

For example, say your savings and investments are ahead of schedule to reach your goal to retire at 60. Your advisor may recommend you rebalance your investment portfolio so it’s more conservative to ensure you meet that goal.

Or you’re in the opposite situation where your savings and assets aren’t enough to cover your desired future lifestyle. So you and your advisor construct a plan to aggressively increase income, invest in riskier stocks, and cut unnecessary spending.

Advisors address many financial needs including, wealth management, accumulation of retirement assets, life and health insurance planning, education funding, tax planning, retirement income planning, and more. Having these resources under one roof often simplifies the financial planning process and makes it much more understandable for clients.

The first step in making positive financial steps is awareness, so this transparent and honest communication is certainly beneficial to clients.

How Fee Only Advisors Get Paid

Depending on the financial advisor, there are many ways fee-only advisors can charge their clients. Because you pay your advisor, you can feel certain their obligation is in your best financial interest.

Fee-only advisors do well by doing well by their clients. This helps them keep their clients and gain more work through positive word of mouth.

Paying your advisor for the services they provide to you ensures your receiving objective advice in your best interest and not from someone trying to sell you products for their own financial gain.

Fee-only advisors can structure their fees in many ways, often unique to the client, and including, management fees, hourly, project based, or retainer fees. Usually the advisor and client sit down to decide the best option for them. Other times the fee-only advisor will only agree to work under one payment plan.

Another benefit from working with a fee-only advisor is that there are no financial marketing hooks, surrender fees, or lockup periods and the client is free to leave at any time if they’re not happy with the services being provided to them. This freedom is a nice benefit considering other agreements that are difficult to leave.

Interested in finding a fee only advisor to help your financial future? Consider finding a local one through our directory.