In financial advising, understanding how your advisor gets paid is just as important as the advice itself. It affects incentives, conflicts of interest, and—ultimately—how aligned they are with your goals.
Let’s break down two common terms that often get confused: fee-based and fee-only.
A fee-based advisor wears two hats. Sometimes they act as a fiduciary, charging a transparent fee (like a percentage of the assets they manage). Other times, they take that fiduciary hat off and earn a commission by selling products like insurance (life, diasbility, long-term care) investment vehicles (mutual funds, UITs, etc.).
This dual compensation structure creates potential conflicts of interest - and often confusion for clients. You may wonder:
Because their compensation comes from both you and the products they sell, it can be hard to know which role they’re playing at any given time.
Fee-based financial advisors can offer the convenience of handling your insurance needs in-house, eliminating the need to coordinate separately with a third-party insurance agent.
A fee-only advisor is a fiduciary 100% of the time. They do not receive commissions or incentives from selling products. Their only compensation comes directly from you, the client.
This can take a few forms:
This setup brings greater transparency and fewer conflicts of interest. You know exactly what you're paying and can weigh whether the advice and service you’re receiving is worth that cost - without wondering what else might be influencing the recommendation.
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I'm a fee-based advisor because I want to be a full resource for my clients - including helping them evaluate term life and long-term disability insurance options. My goal is to provide guidance where it's needed most, while being transparent about how I’m compensated.
There are great and not-so-great advisors in both the fee-based and fee-only models. What matters most is transparency. As long as you clearly understand how your advisor is compensated - and what potential conflicts of interest might exist - you can make an informed decision.
✅ Ask your current financial advisor these questions:
🤝 If you're interviewing new advisors, be sure to ask these very same questions. They're some of the most important questions you can ask.
🚀 Important Reminder: Do NOT ask “Are you a fiduciary?”. This is very common and remember both a fee-based and fee-only advisor could answer “yes” to this. It’s better to ask “Are you a fiduciary 100% of the time?”.
Financial advice is only as objective as the structure that supports it. Fee-only advisors are aligned solely with you and your goal - no sales quotas, no behind-the-scenes incentives. While there are excellent people in both models, understanding the differences can help you make a more informed decision.
Want to dig deeper into how your advisor is compensated - or whether you’re paying fair fees?
Feel free to reach out. It's worth knowing who’s wearing which hat when your finances are at stake.
Nvidia’s CEO Jensen Huang once got a tattoo of the company’s logo on his shoulder when the stock hit $100 per share. He now has $145 BILLION worth of Nvidia stock. How committed are you to your job - tattoo-level committed? 🤣
“God heals, and the doctor takes the fees.”— Benjamin Franklin
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Life is short and time is precious. Thanks for taking yours to read this and I hope to be a part of your Financial Takeoff!
Disclaimer: This is just for informational purposes and should not be used or viewed as tax, legal, or financial advice. Work with your tax professional, legal professional, and financial planner to evaluate which strategies would be the best for your situation.
