The Difference Between Fee-Only and Fee-Based Advisors

XPYRIA Team Insights

The Difference Between Fee-Only and Fee-Based Advisors

Joseph G. Salpietro, ChFC®, AIF® XPYRIA Team Insights

Fee-only and Fee-based may sound similar, but they are in fact very different.

Fee-only advisers conduct their business under a “fiduciary duty,” which means by law; they must have their clients’ best interest at heart. Fee-only advisors have “no inherent conflicts of interest,” they don’t accept fees or compensation based on product sales, and they generally provide more comprehensive advice.  Fee-only advisers can charge a one-time or ongoing fee, depending on the types of services they provide. The fees may be hourly, flat or based upon a percentage of assets under management.

Fee-based advisers may charge both fees and commissions based on the products they sell. Most fee-based advisers hold licenses that allow them to sell investments or insurance products for a commission. Because fee-based or commission-based advisers generally don’t fully disclose the method of compensation they are receiving, it can confuse clients who may not fully understand when their fee-based advisers are working for commissions. There is an inherent “moral hazard” with commission-based advisers. Instead of customers being “advised” on what is in their best interest, are they being “sold” the products that will pay the highest commissions to the adviser?

About the Author

Joseph G. Salpietro, ChFC®, AIF®

Principal, Chief Executive Officer, President and Senior Client Advisor
Mr. Salpietro has knowledge and experience in comprehensive financial planning that integrates global investment management, legal (advance directives and estate planning), tax, insurance, and family dynamics. His passion is helping clients organize their financial lives so that they understand their financial situations, the options they have available, and the financial decisions that need to be made for them to live their best lives. As a fiduciary for over a quarter century, Mr. Salpietro has used his financial insight and expertise to advocate for his clients, providing counsel that is in their best interest.  In addition, Joe has decades of experience as an Outsourced Chief Investment Officer (OCIO), helping institutional clients manage risk, while maximizing the growth necessary to fullfil their organizational missions.  Mr. Salpietro works with individuals, closely held businesses, non-profit [501(C)(3)] organizations, union accounts, Taft-Hartley plans, and government entities. Mr. Salpietro has knowledge and experience working with a wide range of investment alternatives. He is knowledgeable in the areas of investment management and research, investment policy development, financial planning, cash flow analysis, and debt management.