A Word (or a Few) About What a Fee Only Financial Planner is

When it comes to the success or failure of any given investment strategy, managing your financial fees matters – a lot. That’s why we’ve covered the subject a lot in our blog.

There are costs for fund management, underlying trading costs and your own hyperactive trading activity. There also are costs incurred when you align yourself with an advisor like Pathway to help you keep all those costs under control.

How do you make sure that you’re getting more than your money’s worth for the advice you’re purchasing? Step one is to ensure that your advisor is a fee only financial planner.

Fee-Only Schmee-Only

Whenever anyone asks (and often when they don’t), we love to point out that we are a fee-only firm. “So what?” you may respond.

Being a fee-only financial planner means that the only compensation we receive is from our clients. We also ensure that all of our compensation is clearly disclosed each quarter in a simple invoice we send that looks like this sample.

There’s no other monkey business – what you see is what you pay. In contrast to brokers and others who claim to offer something for nothing (“free advice”), we accept no (zero, zip, nada) hidden commissions or similar incentives from other influencers who may distract us from serving our clients’ best interests – and only their best interests – with dedicated, fiduciary levels of care.

Why Fee-Only Sucks (for Us)

In some respects, a fee-only approach can work against us as your advisor. When you can see the entire cost upfront, it’s much easier for you to think about the fact that you’re spending it.

When the costs are instead hidden out of sight as undisclosed markups, kickbacks or similar arrangements, they are way more easily out of mind. This means hidden costs may bug you less even as they cost you considerably more.

This is exactly how many financial intermediaries prefer to pluck you – blind. But don’t just take it from us. In its 2014 bulletin, “How Fees and Expenses Affect Your Investment Portfolio,” the Securities and Exchange Commission advises: “Along with the other factors you think about when choosing either a financial professional or a particular investment, be sure you understand and compare the fees you’ll be charged.”

That’s wise advice, but mighty hard to do when you’re unaware that those fees are going on.

Why a Fee Only Financial Planner Rocks (for You)

So, yes, transparent, all-in fee disclosure means we have to work harder to ensure that you can see not only the cost of our objective advice but also that you are getting your money’s worth from it. It also means our costs had better remain competitive to comparable services, or else.

That’s exactly how we want it to be. Harder for us, but it’s in your best interest to know what you’re paying, so you can assess for yourself what you’re getting for it. This brings us to another important determinant as you seek cost-effective advice that’s always in your best financial interest: Is your advisor held to the fiduciary standard?

Are you nervous about your investments or retirement? Checkout the free guide below: