What Is a Fee-Only Financial Professional?
Let's simplify something. Financial advice mainly comes in two forms: fee-based or fee-only.
It is only natural that we, a fee-only financial firm, believe the fee-only model is the better way to service clients, and for good reason: Fee-only advisors/planners always put the client first and are fiduciaries who do not work on commission but have predictable, easy-to-understand fees.
Fee-Based Financial Advice
But before we address the fee-only model, let's better understand fee-based advice. A fee-based financial planner or advisor can be paid by the client and through other sources, such as commissions from selling products. Now, this is not necessarily a bad thing, earning commissions. There are many hardworking, ethical fee-based advisors out there who do good work for their clients. However, the fee-based model can become problematic, especially if you are unsure or uncomfortable making financial decisions.
Inherently, fee-based financial advice brings about an overlooked concept in the financial services industry: conflict of interest. Suppose an advisor recommends an investment that provides the advisor, with more compensation when compared to another, but the product recommended is not the right fit for the customer or client. In this situation, the client is at a disadvantage, especially if they solely rely on a "professional" to help them make decisions.
Fee-Only Financial Advice
Fee-only advice has been around for a while, made popular, or has become more mainstream, by advisors who have left the larger banks or investment firms to start and/or work for independent practices.
Thus, fee-only planners get paid by their clients directly, not through commissions, bonuses, or other forms of compensation tied to executing (soliciting) certain financial transactions. This process — the way fee-only planners and advisors charge clients — helps mitigate conflicting situations between the client and advisor, offering a more transparent price structure that’s easier to understand.
Fiduciary Responsibility
Fiduciary is a popular word in personal finance for good reason.
A fiduciary is someone who acts in the best interest of a person or beneficiary. Fiduciaries must educate, inform, and advise said persons at all times when providing financial advice on why certain decisions or transactions are right for them. However, not all financial advisors are fiduciaries.
As a Registered Investment Advisor (RIA), under the Investment Act of 1940, ClearVue has a duty to provide unbiased investment advice in our client's best interest. Also, when you hire a CERTIFIED FINANCIAL PLANNER™ (CFP®) who conducts financial planning, you should be confident in knowing you are working with a professional held to a high standard of competency and ethics.
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