Have you recently tried getting your finances in check but felt overwhelmed? As frustrating as it may be, know that you’re in good company. Nearly two-thirds of Americans are financially illiterate.
And who can blame them? They aren’t financial gurus. Their careers in other fields haven’t prepared them to tackle financial topics.
That’s where a qualified financial advisor can step in to help. Now, they won’t offer their services for free, but how are you supposed to pay these professionals?
Depending on whom you recruit, you may end up with a fee-only financial advisor or a fee-based financial advisor. But what’s the difference? We’ll explore everything you need to know about financial advisors’ pay rates below.
What Is a Fee-Only Financial Advisor?
A fee-only financial advisor receives payment directly from their clients for their services. They don’t receive any other forms of compensation like payments from fund providers.
The fee they charge might be on a per-her basis. Or, the advisor may charge one initial fee upfront and work with the client for however long they agreed for.
A fee-only financial planner puts their clients’ well-being above all else. These individuals don’t have underlying motivations to receive additional payment. Most people refer to fee-only financial planners as fiduciaries, which are individuals that act in others’ best interest.
A Fee-Only Financial Advisor vs. Fee-Based Financial Advisor
A fee-based financial planner works very differently from a fee-only financial advisor. A fee-based advisor receives payment from their clients but also obtains income from other sources. For example, the advisor might get commissions from financial products that clients buy.
Using a Fee-Only Financial Advisor: The Pros and Cons
Using a fee-only financial advisor for retirement or other financial goals will come with advantages and disadvantages.
One of the major benefits of using a fee-only financial advisor is the lack of conflict of interest. This individual won’t recommend any financial products to you unless they know they’ll help you meet your goals. They’ll never suggest something just to increase their bottom line.
Another advantage of using a fee-only financial advisor is the chance to obtain an objective second opinion. If you’re currently planning for your retirement and not sure how to proceed, a fee-only planner will provide a comprehensive, unbiased viewpoint.
A final benefit of using a fee-only financial planner is the legal obligation that they are under. Most fee-only planners are fiduciaries, meaning they have to act in their clients’ best interest or risk losing their certifications to practice.
As you’re planning for retirement, it’s essential not to neglect the potential disadvantages of these advisors. They might be more costly and require you to have a minimum level of assets, which might not apply to some people.
Is a Fee-Only Financial Advisor Right for You?
A fee-only financial advisor can be a great individual to trust with your retirement and other financial goals. But you should always understand what services they offer and what their fee includes before you sign an agreement with them. As long as you do your research and use sound judgment, you should be on your way to a stress-free retirement planning experience!
Looking for more tips on navigating your finances? Check out other articles on our site!