Why fee based financial planning

However, they can earn commissions for selling them other kinds of products. A fee-based financial advisor charges her client 0. At some point, the client decides he needs term life insurance and asks the advisor for recommendations.

The advisor recommends several different options offered through her broker-dealer. Fee-based advisors must tread very carefully in these situations. She should also clearly explain how much commission she herself will earn for selling each policy. Not necessarily.

If you only want your advisor to manage your investments, both fee-based and fee-only advisors can do so in a fiduciary capacity. If these potential conflicts worry you, a qualified fee-only advisor might be a more appropriate choice.

Real financial planning should pay off today, and in 10 years' time. Fee-only financial planner or fee-based: Which type is best for me? Learn More. Fees 0. Fees Varies by advisor. Promotion None no promotion available at this time. On a similar note Dive even deeper in Investing. Explore Investing. Get more smart money moves — straight to your inbox.

Sign up. NerdWallet rating NerdWallet's ratings are determined by our editorial team. This means that they will end up costing more, since they are working with more assets. The exact cost of a fee-only financial planner will depend on the way they charge their clients, the services you require and your location.

More experienced advisors may charge higher fees as well. Fee-only financial advisors are just one type of advisor you can work with. The other is called a fee-based financial advisor. The table below breaks down some key differences:. First and foremost, a fee-based advisor will receive normal advisory fees from clients, which is just like a fee-only advisor.

However, where these two fee structures differ is in the additional forms of compensation they earn. For a fee-based advisor, product- and investment-based commissions can be earned on top of advisory fees. However, commissions could create a conflict of interest because they incentivize advisors to recommend transactions and products that could undermine the investments of their clients. Financial advisors typically receive payment directly from their clients. But depending on the service, their compensation can vary.

You can generally break down financial advisor fees into three categories:. No matter which type of financial advisor you work with, you should always know how much they will charge you. Pam Krueger is the creator of the award-winning MoneyTrack investor-education television series seen nationally on over PBS stations.

Pam's also the founder and CEO of Wealthramp. Skip to header Skip to main content Skip to footer. Home Financial Planning.

Financial Planning. Fee-only is about your interests, all the time When you hire a fee-only fiduciary investment adviser to manage your investments, develop a financial plan, or both, you alone are paying a financial professional who is legally and professionally committed to acting solely in your best interests — otherwise known as the fiduciary standard. Financial planning fees Financial planning fees are based on complexity and time spent to develop a detailed plan.

Investment management fees Investment advisers tend to charge an annual fee based on the value of the assets they manage for you — known as assets under management AUM -based fees.

These fees pay for a variety of tasks the adviser carries out on your behalf, including: Recommending a targeted mix of stock and bond investments based on your financial objectives and risk tolerance. Researching and selecting investment options for your portfolio.

Placing trades. Monitoring and reporting performance. Periodically rebalancing your account to its original investment mix. This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff.