5 reasons to look for the words 'fee-only' when you're shopping for a financial adviser
- One benefit of working with fee-only financial advisers is the fact that their thoughts or advice will never be influenced by how much commission they earn. Fee-only advisers work for a flat fee or flat percentage, so they don't make money when you buy into specific investments.
- If you like to manage your own investments, it can still make sense to reach out to a fee-only financial planner for a math check. It's possible they'll see something you don't and provide more insights that can help you reach your goals.
- Before you work with a financial adviser, you should find out if they're a fiduciary. This means they're legally obligated to act in your best interests.
- Looking for a financial adviser to help with your goals? SmartAsset's free tool can help you find one »
As a professional writer who focuses on personal finance, I have interviewed my share of financial advisers. From my personal experience, I can tell you that some financial advisers share awesome advice I would trust in a heartbeat. On the flip side, others have told me some wild stuff and even tried to rope me into sketchy schemes to make money.
Over time, I've learned that a certain type of financial adviser is more likely to offer helpful and honest suggestions for the articles I write: fee-only financial advisers. Where some financial advisers work for commission, fee-only advisers offer their advice and expertise for an hourly fee, retainer fee, or asset under management fee.Whenever anyone asks for advice on finding a financial adviser, I always suggest they seek out fee-only help. Here's why:
1. A fee-only adviser doesn't have divided loyalties
Because fee-only financial advisers work for a flat fee instead of commission, working with one eliminates most of the major conflicts that can destroy a financial plan.
According to Taylor Schulte, fee-only financial planner and host of the Stay Wealthy Retirement Podcast, fee-only financial planners "sell advice and not products." They are not allowed to receive compensation from anyone except for you, he says.
This means you can rest assured knowing that they aren't getting a kick-back from an investment company for peddling an expensive product you don't need.
2. You know exactly how much you're paying for help
Benjamin Brandt, host of retirement podcast Retirement Starts Today Radio, says working with a fee-only planner also makes it abundantly clear how much you're paying for their services. Where traditional financial advisers may be receiving huge commissions you may never know about, fee-only advisers charge either a flat fee or a percentage of assets under management.
Both options would let you know how much you're paying for help without a doubt, and transparency is always a good thing.
3. You get to have a professional check your mathMany professionals who have some financial knowledge choose to manage their own investments because they don't trust financial advisers. There's nothing wrong with a DIY strategy if you are fully informed, but you can also consider reaching out to a fee-only adviser to get some professional guidance for a flat fee.
Roger Whitney, who is known as "The Retirement Answer Man" on his retirement podcast, says this is one great way to utilize a fee-only financial adviser instead of a planner who has something to sell.
"Even if you like to manage your own financials, a fee-only planner can bring a fresh set of experienced eyes to your situation," he says. "They can provide a deeper perspective and help identify blind spots you may not have seen."
4. They can help with goals beyond investing
Since fee-only financial planners don't focus as much on selling specific investments, they are often more knowledgeable about aspects of your finances outside your investment portfolio. This means they can be a good person to turn to for help with financial goals such as paying for college or even getting out of debt.
"A fee-only planner typically brings a more holistic skill set to the table," says Whitney. "They're more likely to have experience thinking through non-investment issues like goal setting, cash flow planning, and such."
5. You're working with a fiduciary
Finally, don't forget that a fee-only financial adviser will likely have a fiduciary responsibility to their clients. Fiduciaries are legally responsible to act in their client's best interests no matter what, meaning you can work with one without having to question their every motive.
And really, this is one of the questions you should ask any financial adviser before you work with them anyway. Are they legally required to give you advice that serves you and no one else? If not, you should keep looking until you find a financial adviser who is.
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