What’s the difference between fee-only and fee-based?

Fee-only means you pay for services directly to the advisor. You might pay a management fee based on the amount of assets the advisor manages, or an hourly fee, or a retainer. Fee-based is a different thing entirely. It means the advisor is accepting commissions, or bonuses, or a flat fee paid by the investments they sell, as well as charging you a periodic fee for management. You may get a discount on trading fees or commissions charged, but this is not a fiduciary arrangement. Be very careful! this is sometimes designed to lull the consumer into trust by confusing terms.

What’s a fiduciary?

Fiduciary means that advice you receive must be in your best interests. As an advisor who is a fiduciary, that means I don’t accept or pay commissions, finder’s fees, or referral fees. Any advice or recommendations that I make carry no incentives or compensation of any kind, beyond the fees you pay directly to me. So why does it matter? Let’s say the right recommendation for you would include an investment in a large company mutual fund. As a fiduciary advisor, I would recommend a no-load mutual fund that had excellent performance and low internal management fees (charged by all funds). That would be in your best interests, because the cost would be rock-bottom low and the quality high. If you went to a non-fiduciary (e.g., a stockbroker or other salesperson), the recommendation could be a large company mutual fund that paid a commission to the “advisor”. That person would not need to consider the level of internal management fees. They would only need to determine that the investment was “appropriate” for you, a much lower standard of care. Someone who accepts commissions is most likely going to prefer the fund that offers the highest commission, not what saves or makes you the most money. Fiduciary is a very important factor, and any advisor should be willing to sign a statement as to whether they are a fiduciary. I’ll sign one, gladly.

How do you charge?

We charge for our services in several different ways, designed to meet your needs for specific services. The initial consultation (up to 45 minutes) is $125, payable at the first meeting. When you decide to engage us, the $125 is applicable to your total fee. We offer:

Customized fee-only advice, by the hour: We can work with you on an hourly fee basis (at $250/hour) in just the same way as other professionals such as lawyers and accountants. Each project is unique, but some typical charges are:

  • A comprehensive financial plan examining your investments, retirement planning, risk management, income tax strategies, estate planning and if applicable, college financial planning, usually takes about 7-15 hours. This is our most popular service and the place where most people should begin.
  • If you want advice on a specific issue, for example evaluating your retirement plan, portfolio opinion, college financial planning, investing an inheritance or any other consultation, usually this can be accomplished in 4-8 hours.
  • Divorce financial planning charges depend on your needs. If the project is analyzing settlement offers and projecting benefits and drawbacks, we are usually able to give you a firm project price based on our hourly fees. This service usually ranges from 7-15 hours. If, however, your case is more complex, we require a retainer and will bill you monthly if the retainer is expended. Our minimum retainer in this situation is $2,000. If you are seeking assistance with post-divorce financial planning, either hourly or asset management services may be appropriate.

We offer asset management if you need ongoing monitoring of your investments, help in selecting investments, and want access to regular advice and updating. We use the same types of portfolios as we would recommend on an hourly basis; the difference is that we handle the details for you, and act as an ongoing resource for your questions and implementation of your investment plans. This service includes a full financial plan and regular updates. Fees are automatically billed quarterly to your account as a percentage of your assets that we are managing. There is no minimum asset requirement–we will manage any portfolio–but our minimum fee for this service is $2,500 for portfolios under $250,000.