Whether you’ve worked with a financial advisor for years or you’re just beginning your research in finding an advisor, you’ve likely realized that there are many different terms used to describe financial professionals. From fee-only advisors to brokers, from wealth managers to planners, there’s no shortage of terms and descriptors. Unfortunately, the distinctions between the types of advisors aren’t always clear – but it’s well worth the time to learn the differences, specifically when it comes down to how an advisor is compensated.
For example, one term that we’re hearing more often these days is “fee-only financial advisor,” and it’s a term that describes JNBA Financial Advisors well.
So what is a fee-only financial planner or advisor?
Simply put, a fee-only financial advisor, also referred to as a fee-only financial planner, does not accept fees or compensation based on product sales. Instead, a fee-only advisor is paid directly and only by the client in exchange for their services. The primary role of financial advisors is to provide individuals and families with financial planning and advice. By working with a fee-only advisor, you gain the reassurance that all of this guidance is tailored to your needs.
Fee-Based vs Fee-Only Financial Planners
A fee-only advisor’s fees are transparent, whether it is a percentage of assets under management, a flat fee, or an hourly fee. This structure allows the fee-only advisor to focus entirely on clients’ long-term financial success. A fee-based advisor, on the other hand, may also receive compensation from other sources, such as commissions from specific financial products recommended by the advisor.
| Fee-Based Financial Advisor | Fee-Only Financial Advisor |
|---|---|
| Earns fees and may also receive commissions from products. | Advisor is only paid by the client and does not receive commissions. |
| Compensation may be less transparent. | Transparent, straightforward pricing. |
| May sell financial products. | Provides services and advice only for a fee, no product sales. |
Discover how JNBA’s fee-only advisors support individuals and families like you.
Advantages of Fee-Only Advisors
Fee-only advisors have several key advantages for individuals and families looking for unbiased guidance. Fee-only compensation models can build trust more quickly through complete transparency of fees, helping align their success with yours. At JNBA, our clients often find value in working with a fee-only advisor, as it creates clarity and confidence in financial decisions.
Transparent Pricing
Since fee-only advisors don’t earn commissions, it is clear how much you’ll pay the advisor for their services. This clarity helps clients plan their financial resources more effectively and eliminates surprises, making it easier to focus on long-term goals rather than wondering about hidden fees. Fee-only advisors do not earn commissions from products, so there is no incentive to recommend specific investments or insurance policies.
Fiduciary Responsibility
Most fee-only advisors operate under a fiduciary standard, meaning they are legally and ethically obligated to put clients’ best interests first. This can provide strong peace of mind for clients who want assurance that every recommendation is aligned with their personal goals and financial well-being.
Considerations of Fee-Only Advisors
While fee-only advisors offer many advantages, they may not be the perfect fit for everyone. Depending on your financial needs, certain aspects of this model could feel limiting or less convenient. Understanding these considerations can help you determine whether a fee-only wealth management model aligns with your goals.
Doesn’t Offer Financial Products
One potential drawback of fee-only planning is that these advisors typically do not sell financial products directly. While this eliminates commission-based conflicts, it means clients must work with separate insurance professionals, for example, for these solutions.
Potential Cost Concerns
Some clients may perceive fee-only advisors as more expensive, especially if they charge based on assets under management or flat annual fees. While the long-term value and objectivity of fee-only advice often outweigh the cost, clients with simpler financial needs or smaller portfolios may find the fees challenging to justify initially.
Connect with a JNBA fee-only advisor to discuss if our team is the right fit for you.
Fee-Only Financial Advisors’ Cost Structures
We know that cost is one of the first questions clients ask when choosing a financial advisor, and it’s an important consideration. At JNBA, we believe in complete transparency so that you can feel confident in how your advisor is compensated and understand the value of the guidance you receive.
The total cost of working with a fee-only advisor varies based on the financial advisor’s fee structure, the services provided, and the complexity of your financial situation. Common fee structures for fee-only planners include:
- Flat Fee: A flat fee is a fixed annual or quarterly fee that covers ongoing planning and advisory services. Clients who value predictability and a clear budget may prefer this structure. This may or may not include active investment management services.
- Hourly Rate: Hourly rate advisors may charge by the hour for guidance on specific financial topics. This can be a good fit for those who don’t need continuous management but want expert input at key decision points.
- Assets Under Management: Also referred to as an AUM fee, this is a percentage of the client’s portfolio’s value. Typical AUM fees average around 1% annually and often include ongoing holistic financial planning and active investment management services. This approach is intended to align the advisor’s success with the client’s; when the client’s assets grow, the advisor’s compensation grows too.
In all of these models, advisors are compensated directly by the client, not through product commissions. The best fee structure depends on your goals, the complexity of your finances, and the type of relationship you want with your advisor.
Connect with JNBA’s Fee-Only Financial Advisors to Learn More
Choosing the right financial advisor is one of the most impactful decisions you can make for your future. Our team at JNBA has been committed to a client-first, fee-only fiduciary structure for decades. This means our focus is on helping you make confident financial decisions aligned with your goals and values. Whether you’re planning for retirement, working to manage your investments in a tax-efficient manner, or creating a comprehensive wealth strategy, we’re here to guide you every step of the way.
If you’re interested in learning more about what it’s like to work with a fee-only fiduciary advisor, please feel free to call or email us. We’re always happy to learn about your financial goals and share how our advice-driven by advocacy® approach could help you achieve your goals.
It should not be assumed that future performance of any specific investment or investment strategy (including the investments and/or investment strategies recommended and/or undertaken by JNBA), or any non-investment related services, will be profitable, equal any historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. A copy of our current written disclosure Brochure discussing our advisory services and fees is available upon request. Please Also Note: There can be no assurance that services provided on a Fee-Only basis will achieve a certain level of positive results or satisfaction.
Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from JNBA Financial Advisors, LLC.
Please see important disclosure information at www.jnba.com/disclosure.
