A fee-only financial advisor is paid only by you, the client. They take no commissions, no 12b-1 trails, no insurance overrides, and no revenue-sharing from the companies whose products they recommend. Their whole income comes from the fees you pay them directly: a percentage of the assets they manage, a flat retainer, an hourly rate, or a project fee. Because no product company pays them, they have no reason to steer you toward one fund, annuity, or policy over another. That is the point of the model. A fee-only advisor at a Registered Investment Adviser, or RIA, also owes you a fiduciary duty under the Investment Advisers Act of 1940. The label to watch out for is "fee-based." It sounds the same, but a fee-based advisor charges you a fee and can also earn commissions on what they sell.
How fee-only advisors charge
Fee-only advisors bill you in one of four ways:
- Assets under management (AUM): a yearly percentage of the money they manage, typically 0.50% to 1.25%, dropping as your account grows.
- Flat retainer: often $2,500 to $10,000 a year, no matter the account size.
- Hourly: usually $200 to $500 an hour, common for one-time advice.
- Project fee: typically $1,500 to $5,000 for a single deliverable, like a financial plan.
All four are billed straight to you. For a full breakdown, see how much a fiduciary financial advisor costs.
Fee-only vs. fee-based
| Fee-only | Fee-based | |
|---|---|---|
| Who pays the advisor | Only the client | Client + product sponsors |
| Commissions allowed | No | Yes, on some products |
| 12b-1 fees | No | Sometimes |
| Insurance commissions | No | Sometimes |
The two terms differ by one word and thousands of dollars a year. The full comparison is in fee-only vs. fee-based.
How to confirm an advisor is fee-only
- Read Form ADV Part 2A, Item 5. It lists every way the firm is paid. Look it up free at adviserinfo.sec.gov.
- Ask in writing. "Do you or your firm earn any commissions, 12b-1 fees, or insurance compensation on what you recommend to me?" A fee-only advisor answers "no" without qualifiers.
- Use a directory that checks the filings. Every advisor in the Fiduciary Check directory is fee-only and has been verified against SEC and FINRA records.
