What is Fee-Only Financial Planning, and Why Does it Matter when Choosing an Advisor?

Every financial advisor gets paid for doing their job, however they don’t all get paid the same way. A fee-only financial planner (all NAPFA advisors are fee-only) is paid directly by the client on a transparent and pre-arranged payment plan. This can be an hourly or project rate, monthly retainer, or percentage of the investments managed.

Other financial advisors are paid through other sources including by the companies they recommend. For example, if the planner sells you a specific investment, mutual fund, insurance or other products, they receive a commission or partial commission directly from the company.

When working with a NAPFA Registered Financial Advisor, there are no hidden fees, commissions, third-party payments, or product sales.

If you are not sure how your financial advisor gets paid, just ask them. It is not something that is easy to tell.

How a planner is paid is quite important because it can affect the advice that they offer to their clients. Professional financial planners need to make a living like everyone else, and they are likely to be most loyal to the person who pays them. If that person is you, the client, then pleasing you will bring them long-term business. They will consistently offer you the best financial advice that they have. A commission-based financial planner may be focusing on the companies they work for before the client’s best interest. That situation may not be beneficial for all of their clients.

Ultimately, you want to pick a planner who will be loyal to you and your interests. That planner is the fee-only planner.