To understand the fee-only advisor, it may be helpful to briefly explore some of the other types of planners. The opposite spectrum of advisor is the commission only planner. These individuals give their financial planning advice without a fee, but make their money on products they recommend to their clients. As such, their recommendations can be biased towards the products they make the biggest commission on. This is certainly not always the case, but simply something you need to understand regarding their income structure. In fact, if you are looking for annuities advice, they probably garner the most knowledge of specific annuity products than any other type of advisor.

The fee-only financial planner is an advisor that earns their income from the fees they charge for financial advice. Their recommendations are solely that, recommendations. They do not push for or sell financial products, and theoretically offer the most unbiased advice. You pay a fixed fee for the financial plan that they prepare for you, or they charge an hourly rate for their time. Either way, they will not be able to help you implement their advice. If they suggest you purchase a fixed annuity, you must independently go out and purchase that annuity on your own. If they suggest a stock purchase, you must use your own broker to purchase the stock.

As a result of the financial planner having no financial incentive for suggesting the products in the financial plan that they recommend, you have a pretty good shot of the financial plan being right for you. Just make sure your planner knows what they are talking about. Because of their distance from the products, they may not fully understand them.

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The fixed annuity can be a very powerful retirement tool when used properly. The fixed payments can be spread out across the lifetime of the retiree, providing guaranteed income they cannot outlive. One of the major risks associated with this sort of transaction is the ever-present inflation risk. Each year your dollars are worth less and less. This depreciating value of money has the potential to make your future income near worthless if you are not careful.

Though some products are able to build in inflation protections through cost of living adjustments, these have traditionally had a difficult time keeping up with inflation. Furthermore, in years of hyperinflation or above-average inflation, the annuity owner will have little chance of making up the lost purchasing power.

Another important fixed annuity disadvantage that you need to be aware of is the cost of pulling out your funds prematurely. Annuities have notoriously high early withdrawal or transfer penalties. The insurance companies have determined that their loss from people constantly changing contracts was too much of a financial risk for them to take on. As a result, insurance companies have implemented steep surrender charges.

This shouldn’t in and of itself dissuade your from fixed annuity products. Despite the different fixed annuity disadvantages, there are still many favorable things that can be beneficial to your retirement or investing plans.

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