By The Galecki Financial Management Team
A Fee-Only financial advisor is paid only by you. For their services, you pay an hourly rate, a flat fee, or a percentage of the assets the advisor manages, and that’s the only money the advisor receives. No commissions or kickbacks from fund companies or insurance carriers. No payment that depends on which product you buy.
If you’ve taken time out of your busy schedule to look at financial advisors, you’ve probably come across the term “Fee-Only.” It shows up most often with registered investment advisors, and it’s a helpful fact to understand before you hire anyone.
So what does Fee-Only mean in practice, and why do we at Galecki Financial Management in Fort Wayne, Indiana, take such pride in those two words? Here’s how it works.
What Does Fee-Only Mean?
Fee-Only financial advisors are paid directly by their clients. They don’t receive kickbacks or commissions for recommending certain securities, insurance products, or investments.
The National Association of Personal Financial Advisors (NAPFA), the professional association for Fee-Only advisors, considers this the most transparent compensation model available, because the advisor’s pay doesn’t change based on what you buy.
Fee-Only advisors are typically registered investment advisors, CERTIFIED FINANCIAL PLANNER® professionals, or both. Both carry a fiduciary duty, which means they’re legally obligated to put your interests ahead of their own.
Fee-Only vs. Fee-Based vs. Commission: How Advisors Get Paid
The words sound almost identical, which is part of the problem. Fee-based advisors charge you a fee and can also earn commissions on products they sell you; Fee-Only advisors can’t.
Here’s the side-by-side:
| How the advisor is paid | Who pays them | Can they earn commissions? | What that means for you |
|---|---|---|---|
| Fee-Only | You, the client, only | No | The advice doesn’t change based on what you buy. |
| Fee-based | You, plus product companies | Yes | Some recommendations may carry a commission, so ask which ones. |
| Commission | Product companies | Yes | The advisor is paid when you purchase a product. |
How Are Fee-Only Advisors Paid?
There are a few common ways Fee-Only advisors charge:
- Hourly: You pay a set amount based on the hours your advisor spends working with you.
- Flat fee: You pay one fee for a defined scope of work or for ongoing planning, no matter how many meetings it takes.
- Percentage of assets under management (AUM): You pay a percentage based on the value of the investments your advisor manages.
Some firms use one of these, some use a combination. Any Fee-Only firm should be willing to put its fee schedule in writing and walk you through what you’d pay in a typical year.
Our own fee schedule is spelled out in our ADV Part 2A, which you can read on our disclosure page.
What Are the Benefits of a Fee-Only Advisor?
If you’re in the market for a financial advisor, here are three reasons to consider a Fee-Only firm:
1. No Conflicts of Interest
No matter how good an advisor’s intentions are, it’s hard to give unbiased recommendations while knowing a commission is attached to one option and not the other. Fee-Only advisors don’t face that pull. They have no reason to push a particular product because they don’t sell products at all; you’re the one paying them.
2. They’re Fiduciaries
Fee-Only advisors who are registered investment advisors are fiduciaries and held to a fiduciary standard, which means they’re legally and ethically required to act in your interest. That includes disclosing conflicts of interest and giving advice built around your situation and your goals.
3. You Get Objective Advice
It’s easy to act on emotion when it’s your own money. There’s talk of a market crash, so you want to rethink your whole investing strategy. A family member needs to borrow money, even though lending it would set your own plan back. You want a comfortable retirement, and you’re not sure whether you’re on track.
In moments like those, it helps to have someone in your corner whose advice doesn’t move with the market or with a sales target.
How to Confirm an Advisor Is Really Fee-Only
You don’t have to take anyone’s word for it. Four things to confirm before you hire an advisor:
- Read Form ADV Part 2A. Item 5 describes how the firm is paid, and Item 10 lists outside business arrangements such as insurance licenses. Every registered firm publishes it.
- Ask for Form CRS. This two-page summary states in plain language how the firm makes money and what conflicts it has.
- Search the NAPFA and CFP Board directories. NAPFA members are required to be Fee-Only.
- Ask the question out loud: “Besides what I pay you, does anyone else pay you when I follow your advice?” The answer should be a simple no.
Does a Fee-Only Advisor Cost More?
Not necessarily, and the comparison isn’t as simple as it looks. With commission-based advice, you still pay; the cost is built into the product through sales charges or ongoing internal fees, so it’s harder to see. With a Fee-Only advisor, you can look at an invoice or statement and know exactly what you paid for the year.
What you’re paying for also tends to cover more ground than investment selection alone: tax planning, retirement income, estate questions, insurance review, and the day-to-day decisions in between.
Why Galecki Financial Management Is Fee-Only
At Galecki Financial Management, our focus is our clients. Our Fort Wayne team specializes in comprehensive Fee-Only financial planning, including cash flow analysis, estate planning, insurance needs such as life, disability, and long-term care coverage, tax planning, retirement planning, and investment advice to help you pursue your financial goals.
We’ve been Fee-Only since the beginning, and we plan to stay that way. We’re paid for our time and our advice, never for selling you something, and we think that’s the clearest way to sit on the same side of the table as the people we work with.
You can read more about our Fee-Only advisors in Fort Wayne and about how our team works with families across Northeast Indiana.
Related Reading From Our Team
How Fee-Only Advisors Help Women Build Wealth
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Financial Challenges in Retirement
Talk With a Fee-Only Advisor in Fort Wayne
Whether you have one financial question to work through or you’re looking for comprehensive planning, our team is here to help. Call our office at (260) 436-8525 or email [email protected] to set up a conversation.
Frequently Asked Questions
What does Fee-Only mean?
Fee-Only means your advisor is paid only by you, through an hourly rate, a flat fee, or a percentage of the assets they manage. They receive no commissions, referral fees, or other payments tied to the products they recommend.
What is the difference between Fee-Only and fee-based?
A Fee-Only advisor is paid solely by clients. A fee-based advisor charges client fees and can also earn commissions on products such as insurance or certain investments. The names look alike, so ask directly which one applies.
Are all Fee-Only advisors fiduciaries?
Fee-Only advisors who are registered investment advisors are held to a fiduciary standard, and CERTIFIED FINANCIAL PLANNER® professionals are required to act as fiduciaries when giving financial advice. Ask any advisor to confirm their fiduciary status in writing.
How much does a Fee-Only financial advisor cost?
It depends on the firm and how much work your plan involves. Fees are generally hourly, a flat planning fee, or a percentage of the assets managed. Every registered firm publishes its fee schedule in Form ADV Part 2A.
Who offers Fee-Only wealth management in Fort Wayne, Indiana?
Galecki Financial Management is a Fee-Only wealth management firm in Fort Wayne, Indiana, serving families and business owners throughout Northeast Indiana. Our advisors handle retirement income planning, tax planning, estate planning, and investment management.
Can a Fee-Only advisor help with retirement income planning?
Yes. Retirement income planning is one of the most common reasons people come to us. That work covers which accounts to draw from and in what order, Social Security timing, tax planning around withdrawals, and how much you can comfortably spend each year.
About Galecki Financial Management
At Galecki Financial Management, we help individuals and families confidently pursue their financial goals. We’re anything but a business-as-usual wealth management firm. We’re different. Friendly. Casual. And really good listeners. Indeed, that’s a big part of what makes us different. Everything we do is based on what we hear from you, because our experienced team of professionals specializes in comprehensive financial planning, cash flow analysis, IRA rollovers, financial services, money management, estate planning, retirement planning, and advising. We help you identify your short- and long-term goals, and then we work together to pursue them. Lastly, and most importantly, we’re fee-only, meaning we’re only compensated for our time. Our only incentive is to help you succeed.