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Investopedia on Fee For Service Financial Advice

In the financial world, advisors and planners such as certified financial advisor or chartered financial advisor are compensated in one of two basic ways: by earning flat fees or by earning commissions. An advice for service advisor is paid a set rate for the services they provide rather than getting paid by commission on the products they sell or trade.

One of the major benefits of selecting a fee-only advisor is the freedom from the inherent conflict of interest that can arise when a significant portion of the advisor’s income comes from selling financial products to you.

Another benefit of using fee-only financial advisors is the opportunity for them to offer an objective second opinion of your situation. This is especially true if the advisor works with clients on an hourly, as-needed basis or perhaps will do a financial plan or financial review for a fixed project fee. Services here can range from addressing a specific financial question to a review of your investment portfolio or a full-blown financial plan.

In addition, an advisor is normally a fiduciary when they charge a fee for planning services and/or they are investing money for an advisory account; as a result, they are legally required to always act in the best interest of their clients and to disclose anything that might smack of impropriety.

Since fee-only advisors do not sell commission-based products, receive referral fees, or collect other forms of compensation, the potential for conflicts of interest is limited. For this reason, many recommend that you only work with a fee-compensated advisor.