Fee-based or fee-only financial advisers?

Identifying the right adviser
Identifying the right adviser © Andy Dean Photography/

Lemoine says it is a mistake to assume that a fee-only planner is superior to a fee-based adviser simply because the latter may earn commissions.

For example, he believes the fee-based approach can make more sense for an investor who does not have several hundred dollars to pay an upfront flat fee to a fee-only planner.

"I've encountered wonderful financial planners who work only on commissions," Lemoine says.

Joshua Itzoe, a partner and managing director at Greenspring Wealth Management in Towson, Md., has worked under three compensation models -- fee-only, fee-based and straight commission-based.

"It's important to realize that there are good and bad advisers in all three scenarios," he says.

Today, Itzoe works as a fee-only planner.

"I have found the fee-only method to be the simplest and most transparent model for clients," he says.

By contrast, with a fee-based or straight-commission model, "there can often be an incentive to sell one product over another" because the adviser makes more money when selling certain products, he says.


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