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What Is a Fee-Only Financial Advisor & Why Does it Matter? Thumbnail

What Is a Fee-Only Financial Advisor & Why Does it Matter?

By Angela Dorsey

If you’ve been researching financial advisors, you’ve likely encountered the term “fee-only.” Referring to registered investment advisors, this designation is one of the most reassuring terms you can find when looking for a trusted financial professional.

But what exactly does it mean, and why should it matter to you?

In this post, we explain what it means to be a fee-only financial advisor and why we at Dorsey Wealth Management take pride in this key distinction.

What Does Fee-Only Mean? 

Fee-only financial advisors are paid directly by their clients. They don’t receive any types of kickbacks or commissions for recommending certain securities or investments. 

The National Association of Personal Financial Advisors (NAPFA) believes fee-only financial advisors are the most transparent and unbiased advisors you can come by. 

Fee-only advisors are typically either registered investment advisors or CERTIFIED FINANCIAL PLANNER® professionals. This is because both types of professionals require a fiduciary duty, which means they are obligated to put their clients’ best interests first.

How Are Fee-Only Advisors Paid?

There are a few different ways fee-only advisors get paid. Some popular methods include:

  • Hourly. You pay a fixed amount based on the number of hours your advisor spends meeting with you. 
  • Flat fee. This is similar to the hourly method, but you pay one flat fee no matter how many hours you spend meeting with your advisor. 
  • Percentage of assets under management (AUM). You pay a percentage-based fee depending on the value of your investments. This fee is typically around 1%.

What Are the Benefits of a Fee-Only Advisor?

If you’re in the market for a financial advisor, here are three reasons why you should choose a fee-only advisor: 

1. No Commissions

No matter how pure an advisor’s intentions are, it can be hard to provide unbiased recommendations when they know they’ll get a kickback or commission. But this isn’t the case for fee-only advisors. They have no incentive to push certain products because they don’t sell any products at all. They’re solely compensated by you.    

2. They’re Fiduciaries

Fee-only advisors are fiduciaries, which means they’re legally and ethically required to act in your best interest at all times. They’re loyal and only give advice based on your unique situation and goals.  

3. You Get Objective Advice 

It’s easy to act on emotion when you’re dealing with your own money. There’s talk of a stock market crash, so you want to change your investing strategy. A family member needs to borrow money, even though you know giving it to them would jeopardize your financial security. You want to live a comfortable life in retirement, but you’re not sure if you’re on track. 

In situations like these, it’s nice to have someone you can go to for objective advice.

Why Dorsey Wealth Management Is Fee-Only

At Dorsey Wealth Management, our focus is entirely on our clients. Prioritizing transparency and providing objective advice, we are committed to supporting you in pursuing your financial objectives with dedication and loyalty.

Whether you’re a current client with a specific financial concern or someone thinking about hiring an advisor to help create a comprehensive plan, we’re here to assist at every stage. Schedule a free introductory 30-minute phone call. You can also reach us at (310) 370-7776 or angela@dorseywealth.com.

About Angela

Angela Dorsey is the founder and financial advisor at Dorsey Wealth Management, a fee-only financial planning firm based in Torrance, California, helping women prepare for retirement. Angela earned a BS in computer science from Loyola Marymount University, an MBA from UCLA Anderson School of Management, and spent 20 years as a Senior Compensation Specialist in large corporations before becoming a CERTIFIED FINANCIAL PLANNER® professional and a Registered Investment Advisor (RIA). That background gave her the tools to couple with her passion for empowering women to make the best financial decisions possible. Angela lives in Torrance, California, with her husband. She enjoys spending time at the beach or surrounded by nature. To learn more about Angela, connect with her on LinkedIn.