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Defining fee-only is a multi-faceted issue. It is not listed yet in Webster’s Dictionary, but we are looking forward to that day. To add more insight into the term fee-only and fee-only planners, we have found some definitive explanations and listed them here.
“The fact that they’re not selling you any specific products makes them more objective. They’re not tempted to put you into the mutual fund or insurance policy that pays them the heftiest commission, because they’re not earning any commission at all.” - Jean Chatzky.
“Which type of CFP is best? Someone whose livelihood doesn’t depend on selling financial products. This rules out CFPs who take sales commission. They may be lovely neighbors but they can’t make a living (or keep their jobs) unless they can persuade you to buy.
Instead, you want what’s known as a fee-only planner. These advisers sell no products and earn no sales commissions. They charge only for their services. You might pay $150 to $300 an hour for tuneup advice, a flat fee per project, an annual retainer or 1 percent of assets for money management.” - Jane Bryant Quinn.
“The biggest pitfall is the conflict of interest arising from fees and commissions, paid indirectly by you. But rest assured that you will pay these costs just as surely as if they had been lifted directly from your wallet. You will want to ensure that your advisor is choosing your investments purely on their investment merit and not on the basis of how the vehicles reward him. The warning signs here are recommendations of load funds, insurance products, or separate accounts. The best, and only, way to make sure that you and your advisor are on the same team is to make sure that he is “fee-only”, that is, that he receives no remuneration from any other source besides you. Otherwise, you will wind up paying, and paying, and paying, and paying… “
- William Bernstein.
“Do They Charge Fees Only?
To avoid such conflicts, consult a fee-only adviser. They do not receive any commissions, which reduces their incentive to churn a portfolio or to recommend unnecessary products.” - Susan Garland, AARP
“People want some consumer protection. They’ve been to these free lunches and want some balanced information from someone who’s not selling a product." - Anita Salustro, who leads educational luncheon seminars for AARP in Michigan.
“Okay, this bears repeating: if a prospective adviser makes money from commissions on your investments, then they fail my litmus test on that fact alone. There’s simply too much conflict of interest. I want you to stick with fee-only planners; they charge a set fee for their services, rather than relying on commissions.” - Suze Orman.
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