How do Fee-Only Financial Advisors get Paid?
There are two basic advisor payment structures to be aware of, fee-only and commissions. Fee-Only advisors do not accept any fees or compensation based on product sales. On the other hand, commission-based agents and brokers are paid commissions from the products they sell.
Fee-only financial advisors, such as the members of our team always operate as fiduciaries. They must legally provide advice that is in their client’s best interest. Many think that all advisors are required to give advice this way, however it is not always the case. Since commission-based advisors are paid on products, they may end up recommending a product that is beneficial to them despite is not being best choice for you.
Fee-only financial advisors cannot receive compensation from a brokerage firm, a mutual fund company, an insurance company, or any other source than you. Fee-only advisors may charge a rate based on a percentage of your assets taken out of your account quarterly, or it could be a flat annual fee, or an hourly rate. Groups like XY Planning Network, Garrett Planning Network, and Alliance of Comprehensive Planner specialize in supporting advisors that charge on an hourly rate.
However, not all fee-only advisors charge an hourly rate. Many are Registered Investment Advisors (RIAs) and have set themselves up to charge a fee on the assets that you invest with them, Assets Under Management (AUM). When meeting with a potential advisor, you should ask them to show their fee structure.
Here at Shore Financial Planning (SFP) we are fee-only which means our clients pay us directly so we can focus exclusively on finding the best solutions for them. We do not accept commissions or any outside compensation. Because you pay us, we work only for you: objective advice, not a sales pitch. And, yes, we are fiduciaries.