Instead of receiving a commission or referral fee on the financial products they sell, a fee-only financial planner is paid by their clients for their services.

This is typically a flat fee or hourly rate for financial planning advice without receiving other sources of compensation.

These fee-only financial advisors are obligated to provide unbiased, transparent advice to help you make the best decisions to reach your financial goals.

What is a fee-based financial planner?

Fee-only planners are paid solely by the client, while fee-based financial planners can make money from products and services. Fee-based planners may also manage your investments and charge a fee as a percentage of the assets.

One of the biggest drawbacks of fee-based planners is the possibility of a conflict of interest, which may arise if their recommendations are influenced by how much money they make.

Fee-only financial planner vs fee-based

Fee-only planners are paid solely by the client, while a fee-based financial planner can make money from both products and services. They may also manage your investments and charge a fee as a percentage of the assets.

Both fee-only and fee-based financial planners offer advice on areas like retirement planning, investments, tax planning and preparation, estate planning, saving, debt repayment and employee financial planning.

Fee-only financial planner: Providing flat-fee and hourly fee financial planning advice directly to clients without receiving other sources of compensation.

Fee-based financial planner: Paid by clients while also getting a commission from selling financial products or receiving a percentage from assets under management.

Advantages of using a fee-only financial planner

Fee-only financial planning is becoming more popular as people demand more transparency from their financial advisers.

Since fee-only financial planners do not profit from selling products or through referral fees, their recommendations do not influence how they are paid. This makes them a reliable second opinion when making important financial decisions.

When you seek fee-only advice from a Certified Financial Planner (CFP), your advisor acts as a fiduciary, meaning they are obligated to put their client’s interests first.

This is in contrast to fee-based advisors, who may recommend investments that are not in your best interests to make more money for themselves. They may also be required to promote their employer’s products, even if they aren’t the best options for you.

Disadvantages of using a fee-only financial planner

While the benefits outweigh the disadvantages, you might pay more for fee-only advice depending on your portfolio or the level of service you require.

It’s also important to note that fee-only advisors are not financially incentivized and receive the same fees regardless of your success, which may affect their results.

Find a fee-only financial planner

Financial advice is not always affected by how a financial planner is compensated, but the fee-only model is certainly recommended for transparency.

A fee-only financial planner charges a flat fee for their services. They also don’t sell financial products, receive compensation or take referral fees, eliminating potential conflicts of interest.

Apart from Quebec, the financial planning industry is not regulated, and anyone can call themselves a financial advisor, financial planner, or fee-only.

When looking for a certified fee-only financial planner in Canada, pay attention to their education, experience and qualifications. Find out if they have a Certified Financial Planner (CFP) designation, meaning they are held to a higher fiduciary standard. Asking how they’re compensated will help you identify potential conflicts of interest.

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