investing

Fee-based or fee-only financial advisers?

Is your adviser really 'fee-only'?
Is your adviser really 'fee-only'? © Jeanette Dietl/Shutterstock.com

Millions of investors count on their financial adviser to help them build wealth. But a tricky little turn of phrase can create confusion among consumers shopping for financial guidance.

It all boils down to the distinction between "fee-only" and "fee-based" advisers. While the two terms sound similar, there are crucial differences.

Craig Lemoine, assistant professor of financial planning at The American College of Financial Services in Bryn Mawr, Pa., does not believe that either the fee-based or fee-only approach is inherently superior.

"Is a piece of cheesecake superior to a piece of chocolate cake?" he asks, adding that both fee-based and fee-only approaches have strengths and weaknesses.

But he says all investors should understand the differences between the models.

"Consumer confusion can lead to trouble, both for the client and adviser," he says.

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