What Fee-Only Actually Means
Fee-only financial advisors get paid directly by you — and only by you. No commissions from product companies, no kickbacks for recommending one fund over another, no hidden revenue streams that create incentives you don’t know about. When your advisor earns the same amount regardless of which investments they put you in, the advice tends to get a lot more honest. That’s the core appeal, and it’s a bigger deal than most people realize until they’ve experienced both models.
How Fee-Only Differs from Commission-Based (And Why It Matters)
A commission-based advisor makes money when you buy certain products. That doesn’t automatically mean the advice is bad — plenty of commission-based advisors are ethical and competent. But the structure creates a built-in tension between what’s best for you and what generates the most revenue for the advisor. A fee-only advisor has no financial reason to recommend an expensive actively-managed fund when a low-cost index fund would serve you better. I’ve seen clients walk through the door after a decade with commission-based advisors, paying 1.5% in fund expenses on top of advisory fees, when comparable index funds charge 0.03%. Over ten years on a half-million dollar portfolio, that difference compounds into serious money.
Common Fee Structures
Fee-only doesn’t mean one-size-fits-all pricing. There are three common models, and which one makes sense depends on your situation:
Percentage of assets under management (AUM): Usually 0.5% to 1.5% of the portfolio they manage. This is the most common model for ongoing advisory relationships. On a $500,000 portfolio at 1%, you’re paying $5,000 a year. The fee scales with your wealth, which means the advisor benefits when your portfolio grows — alignment you want.
Hourly rates: Typically $150-400 per hour. Good for specific questions — should I do a Roth conversion this year, how should I handle this inheritance, does my retirement plan make sense? You pay for the time you use and nothing more. Makes sense if you’re mostly a DIY investor who needs occasional guidance.
Flat fees: A set price for a defined scope of work — a comprehensive financial plan, a retirement analysis, a tax strategy review. Usually ranges from $1,500 to $5,000 depending on complexity. Clean and predictable, which some people prefer.
How to Find Fee-Only Advisors
Two directories are worth checking. NAPFA — the National Association of Personal Financial Advisors — maintains a searchable database of fee-only advisors who’ve signed a fiduciary oath. The Garrett Planning Network lists hourly-rate financial planners. Both organizations require members to document their fee-only status, which provides a layer of verification beyond the advisor’s own claims. That said, always confirm the fee structure directly. “Fee-only” is a specific term, but “fee-based” — which sounds similar — means something different and may include commission income.
Questions to Ask Before You Hire
Don’t take anyone’s word for it. Ask these directly and get the answers in writing:
How exactly do you get paid? Are there any circumstances where you receive commissions, referral fees, or revenue sharing? Do you act as a fiduciary at all times, for all services? Can I see a written fee schedule? What additional costs might I pay beyond your advisory fee — fund expenses, transaction fees, custodian fees?
An advisor who gets vague or defensive about any of these questions is telling you something useful about how they operate.
Is Fee-Only Right for You
Fee-only advice makes the most sense when your financial situation is complex enough that conflicted advice could cost you real money — which for most people means once you have significant retirement savings, receive equity compensation, own a business, or face major tax planning decisions. The advisory fees are real, and for someone with a simple situation and the willingness to learn, self-directed investing with low-cost index funds might be the better path. But if you’re going to pay someone for advice, paying them in a way that eliminates the most common conflicts of interest is worth the premium.
