What’s the Difference Between a Fee-Based and a Fee-Only Financial Planner?

What’s the Difference Between a Fee-Based and a Fee-Only Financial Planner?

Date: July 23, 2019,

As you consider the various professionals available who can help you to create a financial plan and understand your savings and investment options, you may find yourself asking, What’s the difference between fee-only and fee-based financial planning? Before you rush into a working relationship with a financial professional in Indiana, here’s what you should know–

Fee-Based Financial Planning

A fee-based Certified Financial Planner™ (CFP®), just like a fee-only financial advisor, will get paid by you, the client, for their services. However, in addition to collecting a fee from clients, fee-based financial planners are also able to collect fees and payments from other sources, too, including things such as commissions from products sold to clients. While this often works out completely legitimately, as Certified Financial Planners™ have a fiduciary duty to act within their clients’ best interests, fee-based arrangements are often criticized as creating a conflict of interest because there is the potential for an advisor to steer a client towards a product or investment that will yield compensation for the advisor.

Fee-Only Financial Planning

Unlike a fee-based financial planner, fee-only financial planners can only be paid by a client; they do not benefit from third-party investments or products and do not receive a commission. Again, Certified Financial Planners™ have an obligation to act as a fiduciary, which means that they are obligated to act in a way that is beneficial to a client. This is true regardless of how a CFP® collects a fee. Other financial professionals who do not hold this certification, or who are not registered investment advisors, are not types of fiduciaries.

Which Is Better: Fee-Based or Fee-Only?

Just because an advisor is fee-based does not mean that they won’t act with your best interests in mind, or that they will succumb to conflicts of interest; in fact, some of the best financial planners today operate on a fee-based system. The best thing that you can do is to look up a company or/and an advisor with the Securities and Exchange Commission (SEC) prior to hiring – this way, you can see if the financial advisor has any history of misconduct, as well as how brokers at a financial company are compensated.

Consult with Harvest Financial Planning, LLC Today

If you have questions about planning for your financial future and are searching for a Certified Financial Planner™ who will work with your best interests in mind, contact our team at Harvest Financial Planning, LLC today. Our new client process starts with a free consultation, and is easy to schedule – just email us or call us directly to get started.

*This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal, or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.

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