Top 3 Reasons Why You Should Work with a Fee Only Wealth Management Firm

You are already retired, about to retire or thinking about retirement. You’ve built up a substantial nest egg, and you’ve worked really hard to get to this point. As you begin to envision all the benefits of retirement, you can’t help but think about what could go wrong. You need someone to give you an objective opinion, so you decide to hire a professional to look after your finances. The problem you run into is that there are so many investment firms touting their services, you’re not sure which one is right for you. This is where fee only wealth management firms stand out from the rest.

The last thing you should have to do is worry about whether your financial advisor is working hard with your hard-earned money. Fee-only wealth management firms and the fee-only financial advisors who work for them can give you the peace of mind that you need. This is because they are legally obligated to put your best interest first, and they are not limited by the investments they can recommend. Best of all, they are prohibited from making commissions, referral fees or kickbacks.

Everyone’s retirement plans are different. You may have plans to travel, do some volunteer work or simply keep up with your current lifestyle. You may look forward to spending more time with your children and playing with your grandchildren. Most importantly, you yearn to be able to relax and take a deep breath. After all, you’ve made it. You’ve worked hard for the majority of your adult life, and you shouldn’t be anxious about the road ahead. It’s finally time to enjoy the fruits of your labor.

But does your current financial situation allow you to do everything that you set out to do? Is your company 401(k) invested in the right asset classes? What if you get sick and have to pay for healthcare costs? Will Social Security cover monthly living expenses, or even be around for the rest of your life? These are questions that a fee-only financial advisor can answer for you candidly.


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Here are the top 3 three reasons why fee-only financial advisors and fee-only wealth management firms should be on your retirement planning team:

1. You Avoid Conflict of Interest

A financial advisor working for a big Wall Street bank might be encouraged, or even required by upper management, to recommend the bank’s in-house investment products.

If these investments are indeed what you need, great! But more often than not, the advisor isn’t thinking about whether the investments they recommend are suitable for your individual needs. They are selling the same company-sponsored products to every retiree that walks in the door, and in turn, enhancing the bottom line of the company they work for.

Alternatively, fee-only financial advisors do not work for Wall Street banks and are not tied to a specific company or investment. They have free reign to recommend a wide variety of products that suit your investment goals, not the goals of their bosses.

2. There’s a Transparent Fee Structure 

Another reason for hiring fee-only wealth management firms is their transparent fee structure.

When it comes to choosing the right wealth management firm, you should first ask your potential advisor about their compensation. You need to know how they get paid. If an advisor ever tells you that their services are free, you should immediately cross them off of your list of potentials. No advisor works for free.

As its name suggests, an advisor who offers fee-only financial planning only charges a fee that is agreed upon upfront. The structure of the fee may differ depending on the advisor. Some advisors charge a percentage of assets they manage for you, while others charge a retainer or by the hour. But at the end of the day, you know exactly how much money you will pay the advisor, and can make your decision based on this transparent information.

On the other hand, you may be introduced to what’s called a fee-based financial advisor. A fee-based financial advisor is often confused with a fee-only financial advisor, and that’s by design. In addition to charging you a fee for managing your finances, a fee-based financial advisor can receive referral fees or kickbacks for recommending you to their network of friends and colleagues. This fee structure incentivizes them to recommend products that earn them the highest commissions.

And worst of all, these fees are entirely hidden from you. Fee-based financial advisors are under no obligation to tell you about the commissions they make.

3. The Benefit of a Financial Fiduciary

Fee-only financial advisors are Registered Investment Advisors (RIAs) who have a fiduciary responsibility when it comes to managing your assets. They are legally bound to make investment decisions based on your best interest, and above their own. If they don’t, they can be fined or lose their credentials.

On the other hand, the rules governing non-fiduciaries are a bit looser. Stockbrokers, broker-dealers and insurance agents still make investment recommendations based on your best interest, but they are not required by law to put your interests above their own. 

For example, stockbrokers stand to make commissions on each trade they execute. They could conceivably recommend you to trade in and out of a number of stocks solely for the purpose of making a commission off of each transaction, not because they thought those investments were the most suitable for your portfolio.

Final Thoughts

No matter what stage of retirement planning you’re in or how much wealth you’ve accumulated, it pays to visit a financial advisor and talk about your specific retirement goals.

The easiest way to find one is through the National Association of Personal Financial Advisors (NAPFA). It is an association of fee-only financial advisors that requires each advisor to adhere by its fiduciary oath.

When you sit down with an advisor, make sure to ask them targeted questions. Ask them about any potential conflict of interest, how their fees are structured and whether financial fiduciary laws apply to them.

Most importantly, ask advisors whether they can give you the peace of mind you need so that you can enjoy the best years of your life.


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Filed Under: Comprehensive Financial Planning