What is a Fee-Only Financial Advisor?
It is very important for consumers to understand what type of financial planner or financial advisor they are working with. As we look at the question of what is a fee-only financial advisor, first you should know that this type of advisor represents less than 15% of all financial advisors. We're going to answer this question here in this article, as well as introduce you to an organization made up completely of fee-only financial advisors.
A fee-only financial advisor is, once again, a minority representation of all financial advisors. These financial advisors only get compensated directly by their clients. A fee-only financial planner does not get compensated by companies through selling those companies' product.
The only way that a fee-only financial advisor gets paid is directly by their clients, much like an attorney or a CPA. I would mention doctors as well, but I believe some doctors might receive indirect or even direct compensation from pharmaceutical companies.
So we can no longer say doctors are the same. Typically CPAs and attorneys still operate in that manner, and so do the fee-only financial advisors.
When you receive advice from a fee-only financial advisor, they may charge you by the hour, they may charge a retainer, or they may use some other type of calculation based on your net worth and income. Or they may use one of the most popular methods: AUM, which stands for assets under management. This is the amount of money that the financial planner is managing for you. They will typically charge you anywhere from 90 to 200 basis points to manage your money. You will be only way that this advisor will get compensated.
There is a great place that Clarke Howard recommends: The National Association of Personal Financial Advisors, or NAPFA. This group is made up of exclusively fee-only financial planners that have an extremely rigorous continuing education requirement of 30 hours per year. It's one of the highest in the world for any professional association. All of their financial planners are fee-only, and they take a fiduciary oath and a fiduciary standard that they maintain when working with their clients. This is an excellent place to find fee-only financial advisors to work with for wealth management, retirement planning, and more.
If you want, set up a short 20 minute call with Thomas Cloud, Jr., CFP(R) to discuss how we operate as fee only planners on behalf of our valued clients: https://calendly.com/thomascloud/retirement-ready-success-call. For example you may wonder how much we charge our clients or how much you are currently paying your financial advisor now? We can walk thru those questions with you and get answers to them. There is no cost or obligation.
Also I encourage you to watch my free retirement video: https://go.thirdactretirement.com/strategy