When searching for a financial advisor you may come across the terms fee-only and fee-based. While the names are similar, the two approaches are fundamentally different, and can greatly affect the quality of the financial advice you receive. Here we discuss the key differences, and the questions you should ask when interviewing a prospective advisor.
Fee-only advisors are compensated directly by the client. Fees are transparent, and the advisors don’t receive any hidden compensation for the advice they render. Fees are typically charged as a percentage of assets under management, or on an hourly basis.
SageVest Wealth Management proudly serves as a fee-only advisory firm.
Advisors who are fee-based not only collect a fee from the client, they also accept commissions and compensation from the products or services they recommend. There is an inherent conflict of interest: is the advisor recommending insurance coverage because you need it, or because of the commission they stand to gain? With a fee-based structure, you cannot be guaranteed that the advisor is always working in your best interest.
Fee-Only Hourly Versus Ongoing Advice
Fee-only advisors are frequently construed to charge on an hourly basis. While some advisors charge by the hour, many advisors (including SageVest) work with clients in an ongoing advisory relationship.
If you’re working with an advisor on an hourly basis, it’s incumbent upon you, as the client, to know when to reach out to the advisor to seek advice. If you’re not a financial expert, you might not know when planning is warranted. From decades of experience, we’ve too often seen individuals reach out only when problems arise, addressing their finances on a reactive versus a proactive basis.
SageVest typically recommends an ongoing advisory relationship in recognition of the fact that your finances are ever evolving. We recommend updating your financial planning at least annually to ensure you’re responsive to financial changes in your life, the markets, tax structures, etc. This helps you to know that you’re taking advantage of planning opportunities each year, and that you’re on a solid path toward your financial goals.
Questions to Ask a Prospective Advisor
How can you ensure that a financial advisor will always act in your best interest? Here are questions to ask during the initial interview:
- Do you classify yourself as fee-only or fee-based?
The answer should be fee-only to help avoid conflicts of interest.
- Do you serve as a fiduciary advisor?
Fiduciary advisors must, BY LAW, always work in their client’s best interest.
- How are you compensated?
Fee-only advisors are compensated directly by the client.
- Do you accept commissions, compensation, or fees from the products or services you recommend?
Ideally the answer is no, but if yes, you need to be alert to the recommendations provided to ensure they’re in your best interest.
More questions can be found in our 20 Important Questions To Ask A Financial Advisor.
How SageVest Wealth Management Is Structured
SageVest Wealth Management is structured as a fee-only advisory firm. Furthermore, we proudly accept a fiduciary responsibility to act in your best interest. Therefore, every investment and financial recommendation we proffer is unbiased and based solely on what works best for you.
As an example, if we recommend insurance or long-term care coverage, it is because we want to help ensure that you and your family are adequately protected. We do not receive commissions or compensation from these recommendations. This enables us to provide comprehensive advice you can trust.
At SageVest, our fee structure is straightforward and transparent. Fees are calculated as a percentage of your assets under management and range between 1% and 0.5%. Financial planning services are embedded within this fee structure to ensure all clients receive the financial planning support they need and deserve.