What Does Fee-Only Financial Advisor Mean?

Choosing a financial advisor starts with understanding how that advisor is paid. The way an advisor earns money can shape the recommendations you receive, so it is one of the first things worth asking about. This post explains the main compensation models and the questions to ask any advisor you are considering.

How Advisors Are Paid

Fee-only. A fee-only advisor is paid only by the clients they serve. A fee-only advisor does not earn commissions from selling investment or insurance products.

Commission-based. A commission-based advisor earns money when you buy certain products, such as mutual funds, annuities or insurance policies. The product provider pays the commission.

Fee-based. This term sounds similar to fee-only, but it generally means an advisor may charge fees and also earn commissions. Ask for the details in writing.

What “Fiduciary” Means

A fiduciary is obligated to put a client’s interests first. Not every financial professional is held to a fiduciary standard for all of their work, so it is reasonable to ask whether an advisor acts as a fiduciary and for which accounts and services. TCM Wealth Advisors is a registered investment adviser and a fiduciary: we are required to act in your best interest and to disclose conflicts of interest. When we advise on a retirement plan or IRA, we are also fiduciaries under federal retirement law. You can read more about our fiduciary commitment and our philosophy.

Questions to Ask Any Advisor

How are you paid, and can you show me in writing?
Do you receive commissions or other compensation from anyone besides me?
Are you a fiduciary, and does that apply to all of my accounts and to all of your advice?
What services do I receive?
Where will my assets be held, and who has custody of them?
Can I see your Form ADV? (Registered investment advisers file this with regulators. It describes services, compensation and conflicts of interest.)

How TCM Wealth Advisors Works

TCM is a fee-only investment advisory and wealth management firm in Fairlawn, Ohio. We are compensated only by our clients. We accept no commissions from mutual funds, brokerage firms, insurance companies or any other third party, and we have no proprietary products to sell. We have served clients in Northeast Ohio for over 30 years. Read our Form ADV Part 2A and 2B brochure for the full details of our services and compensation.

Is Fee-Only Always the Better Choice?

Each model has trade-offs. A commission-based advisor can be a fit for someone who wants a single product and no ongoing relationship, while others prefer an ongoing relationship with an advisor who is paid only by them. The right choice depends on what you need. Compare the services and the conflicts of interest, and ask for everything in writing.

Frequently Asked Questions

What does fee-only mean?

A fee-only advisor is paid only by the clients they serve and does not earn commissions from selling investment or insurance products.

Is a fee-only advisor always a fiduciary?

Not automatically. Ask any advisor directly whether they act as a fiduciary, and for which accounts and services.

How can I check an advisor’s background?

Use the SEC’s Investment Adviser Public Disclosure site and FINRA BrokerCheck, and ask for the advisor’s Form ADV.

Have questions about how we work? Schedule a conversation or browse our frequently asked questions.

This content is developed from sources believed to be providing accurate information. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.