A Fee-Only, Fiduciary, Independent Financial Advisor
You’ve decided to find a financial advisor to partner with on your journey to financial success—congratulations! Now that you’re starting to research financial advisors, you’ve probably come across the term “fee-only.” This term is usually used to describe registered investment advisors (RIAs), who provide services and planning that, by law, can only be in your best interest. So keep your eyes peeled for “fee-only” when searching for a financial professional.
You might be wondering, “Okay, but what does it mean exactly? And why is it important?”
Today we’ll talk about what it means to be a fee-only financial advisor—and why we at Peterson Wealth Management pride ourselves on this one little word.
How Do Advisors Get Paid?
To truly understand the value of a fee-only advisor, it’s first important to understand the different ways advisors can get paid. The three most common methods include:
- Commission-based
- Fee-based
- Fee-only
Commission-based advisors don’t charge fees to their clients. On the surface, this model sounds great. But these advisors have to get paid somehow, so instead they earn commissions from financial and insurance products they sell to their customers. Even if they mean well, commission-based advisors may be more motivated to sell products that will earn them the most money, rather than providing advice that is in the best interest of the client.
Fee-based advisors may sound like they’re fee-only, but they also make commissions from financial products and transactions. In addition to charging their clients fees, they earn a percentage of their revenue from selling products on behalf of brokerage firms, mutual fund companies, or insurance companies, thus placing them at the same risk for conflicts of interest as commission-based advisors.
Fee-only financial advisors are paid directly by their clients—and only by their clients. They don’t receive any type of "kickbacks" or commissions for recommending certain securities or investments. Their fees are typically structured as a small percentage of the assets they manage, known as assets under management (AUM) fees. Because fee-only advisors only get paid by their clients, they only succeed when you succeed.
What Are The Benefits Of A Fee-Only Advisor?
If you’re in the market for a financial advisor, here are three reasons why you should choose a fee-only advisor:
1. No Conflicts Of Interest
No matter how pure an advisor’s intentions are, it can be hard to provide unbiased recommendations when they know they’ll get a "kickback" or commission. But this isn’t the case for fee-only advisors. They have no incentive to push certain products because they don’t normally sell any products. They’re solely compensated by you, not the product producer.
2. They’re Fiduciaries
Fee-only advisors are fiduciaries, which means they’re legally and ethically required to act in your best interest at all times. They’re loyal, quick to disclose any conflicts of interest, and only give advice based on your unique situation and goals.
3. You Get Objective Advice
It’s easy to act on emotion when you’re dealing with your own money. There’s talk of a stock market crash, so you want to change your investing strategy. A family member needs to borrow money, even though you know giving it to them would jeopardize your financial security. You want to live a comfortable life in retirement, but you’re not sure if you’re on track.
In situations like these, it’s nice to have someone you can go to for objective advice.
Why PWM Is Fee-Only
We at Peterson Wealth Management have our clients—and our clients only—in mind. We take great pride in being transparent and unbiased, and in giving our clients undivided loyalty and dedication to help them make financial goals a reality.
Do you have a specific financial concern that’s keeping you up at night? Do you need help developing a big-picture financial plan? Rather than feeling overwhelmed, remember that you’re not alone. We’re here to guide you every step of the way. To get started, schedule your no-fee consultation now!
