What Is A Fee-only Planner?
Choosing between the different types of financial advisors can be a somewhat daunting task. Not only must you find a competent, trained, and qualified advisor, but you must select from the various different types of advisors available. Furthermore, the type of advice you are looking for will factor into what type of planner you seek out. Not all advisors are created equal. One of the most frequently recommended advisor types by popular celebrity financial planners is the fee-only advisor.
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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