Fee Only Vs. Fee Based Financial Advisor – What the heck is the difference?

Potato, potahto. Tomato, tomahto. Fee Only Vs. Fee Based. The same difference, right?

Not quite.

If you’ve ever interviewed or hired a financial advisor, chances are you you have no idea how you are paying them. Advisors can get paid way in many different ways.

Mainstream media loves the “fee only” advisor. No conflict of interest, no commissions, certainty of what you are paying.

But then you have the “fee-based” advisor. The fee-based advisor earns a fee, but then can also earn a commission. Say what? Yes, it’s all together confusing and that’s why I attempt to explain it here:


Definition of Fee-Only Vs. Fee-based Advisors

If you’re looking for a true fee-only advisor, then check out this article about NAPFA which is an association of true fee-only financial advisors.

Another good resource is an article on Moolanomy.com where they interview me on the difference between a fee-only vs. fee based advisor. Miranda did a good job explaining the differences (much better than I can. :) )

And finally, you can read about PT’s experience of meeting with a fee-only financial planner. PT (Phil Taylor) does an awesome job giving you a play by play of meeting with a fee-only planner. You almost feel like you are in the meeting with him.

What Type of Advisor am I?

I thought that you would never ask….:)

Well, here’s how it can get even more confusing. When I first started the blog, I still held my Series 7 license so I was definitely “fee-based”.

Last year, I dropped my Series 7 and I could have been considered a “fee-only” advisor, but have chose to continue to refer to myself as fee-based.

Why? Even though I can longer earn a commission off the sale of a security (stock, bond, mutual fund, variable annuity, etc), I have kept my Illinois life insurance license open. That means I can still earn a commission off of an insurance product (term insurance, whole life, fixed annuity, etc). Even though I haven’t sold any since the transition, I’m a big believer in insurance so my assumption is that one day I will use it.

So keep that in mind when interviewing advisors. Even though they don’t have a Series 7, they can still potentially earn a commission off selling you an insurance product.

Have you met with a fee-based or fee-only financial advisor? What was your experience?

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