Here’s a picture of what an appointment with a fee-only advisor would look like: You, sitting face to face with a professional advisor, in a relaxed setting. The conversation ranges from your interests and goals to new tools that are available for financial planning. There’s no high-pressure tactics, and you’re likely to learn about asset management from an academic and an economic perspective in easy-to-understand terms.
It’s a rewarding and fun experience for both the advisor and the investor. This may be different than what you may have experienced before or in a traditional bank setting, and that’s why so many investors are enjoying this approach.
Advisors who operate on a fee-only philosophy are registered financial planners, but they won’t accept fees from sales – instead they are paid a flat fee for their services. Companies and individuals say that they prefer working with a fee-only investment advisor because they offer advice that is more comprehensive than what other advisors offer.
There has been some confusion regarding the difference between a fee advisor and commission-based advisors. The commission-based advisors charge a fee in addition to their commission and call themselves “fee-based,” which is what is creating the confusion. However, the National Association of Personal Financial Advisors (NAPFA ) is the key organization that oversees the fee-only financial advisors in the U.S. Advisors associated with this organization are true fee-only advisors.
Once an advisor signs on with NAPFA, they agree to never take any compensation beyond the original fee. This allows them to make recommendations that are unfettered and free of conflicting interest.
“Fee-based” advisors sometimes offer the choice of fees or commissions, but they can’t really do both for the same client in the same account. Sometimes, they may pitch the more profitable option or easiest sale, rather than what’s in the client’s best interest.
People may be enticed by an offer that a commission may be cheaper for them, but that commissioned product may come without ongoing evaluation or any legal responsibility (fiduciary duty) for the advisor. Additionally, advisors can sometimes recruit a client with “fee-based” language, but then shift the client to what might be a much better deal for the advisor themselves (without the client realizing it).
In contrast, quality fee-only advisors are connected by a willingness to work on behalf of their client. Their work is in line with their personal philosophies and the client always comes first. It’s actually a mindset whereby the fee-only advisor functions as if he/she were the client, but with the expertise inherent in a financial advisor with years of experience.
Conversely, advisors working on commission are working to gain money through the successful transactions related to specific products or transactions. This offers some unique perspectives, but it doesn’t fully address what the client actually needs.
Fee-only advisors have extended strategies that go beyond investments. They manage all the client’s financial affairs with a holistic approach. When it comes to charging the client, fee-only advisors will charge a percentage of assets with an emphasis on giving wealth management advice that is very comprehensive. Some advisors favor charging a flat retainer fee while others will bill on an hourly basis.
However, the hourly rate model can be a drawback to some businesses that fear they’ll go over budget. They’ll call their advisor much less and they’ll be missing out on the services that the advisor can offer. In the interest of the client, many fee-only advisors will steer clear of the hourly rate and go with a flat fee.
The Family Investment Center works on a fee-only philosophy and has the dedication, experience and education to give you service that’s completely different. Specific areas of expertise are in portfolio design and asset management, and Family Investment Center also gives independent advice for individuals and families.
Contact Family Investment Center today to start experiencing service that truly is different.