What Does “Fee-Only” Mean?
The manner in which your financial advisor is compensated can make all the difference in the recommendations that he/she make for you. That’s because some advisors work under a standard that requires only that their recommendations be suitable to your particular situation. Other advisors work under a fiduciary standard that requires advisors to consider what is in their client’s best interest. You may be wondering why your advisor would make a recommendation that is not in your best interest. That’s where the issue of compensation comes into play.
There are three basic ways in which financial advisors are compensated:
Through a commission-based model
Through a commission & fee model
Through a Fee-Only model
Both commissioned and commission & fee advisors receive a compensation based on the specific financial products that they sell to you. Due to the conflict of interest inherent in these transactions, the aforementioned advisors may have difficulty putting the client’s interest above their own.
Biltmore Wealth Advisor’s position is that the Fee-Only method of compensation is the most transparent and objective method. This model minimizes conflicts and ensures that your advisor acts as a fiduciary. Fee-Only advisors are compensated directly by their clients for advice, plan implementation and for the ongoing management of assets under their management (AUM).
It is worth noting that Fee-Only financial advisors may be paid hourly, as a retainer, as a percentage of AUM, or as a flat fee. At Biltmore Wealth Advisors we are compensated by a flat percentage against the AUM that we manage for our clients.