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This is Jeff Rose with Good Financial Cents. Today I want to talk about the difference
between a fee-only financial advisor versus a fee-based financial advisor.
What is the difference? A fee-only financial advisor is directly compensated from the client
and only compensated from the client. That means they don’t get paid a commission from
an investment product, they don't earn any trails from their brokerage firm or mutual
fund company, and they don’t get paid a referral fee. The only way they get paid is
directly from the client and working with that relationship.
Typically the fee-only financial planner or financial advisor can get paid hourly, a fee
for service or a retainer fee. Another common method is assets under management. I talk
more about the fee-only financial advisor in another video so if you want more information,
be sure to check it out.
A fee-based financial planner is a little trickier. They have the option of earning
a fee and also earning a commission. Trying to figure out what relationship or what role
they are working with you makes it a little bit harder for you to distinguish. What that
means is they can open an account and earn a fee where you're paying typically assets
under management, so a percentage of the total investments they manage for you, or they can
also sell you an investment product. That could be a mutual fund. That could be an ETF
as in a stock. That also could be a variable annuity or insurance or any other type of
insurance product.
When working with that fee-based financial advisor it is very, very important to understand
exactly how they are getting paid or, stated another way, how you're paying them. Make
sure you understand that relationship.
Those are just some of the few differences between a fee-based financial advisor versus
a fee-only financial planner. If you have any more questions you know where to find
me, goodfinancialcents.com. We'll see you soon.
The opinions voiced in this material are for general information only and are not intended
to provide specific advice or recommendations for any individual. To determine which investment(s)
may be appropriate for you, consult your financial advisor prior to investing.