What is Fee-Only Financial Planning and Why is it a Good Idea?

What is Fee-Only Financial Planning and Why is it a Good Idea?

A Guest Post by Martin Scott

You may have never heard of fee-only financial services before.  Or maybe you’ve heard from friends and family that they don’t pay their financial advisors.  The truth is that there is more than one way for financial professionals to use when servicing their clients.  While some financial advisors work with their clients on a commission basis (where the advisor receives commission on the growth of the client’s portfolio), others follow the fee-only method.

Martin Scott, Founder of Lasting Wealth Principles, is a fee-only practitioner who believes this method is the most beneficial arrangement for clients because the services that are offered are more transparent, objective, and help to advance the Financial Planning profession.

In this article written by Martin himself, he discusses the benefits of fee-only financial services versus commission based financial services.


Fee-Only Financial Services

written by: Martin Scott


The purpose of this post is not to start a debate on what model is "right or wrong," but to share why I think fee-only, financial planning services provide the highest level of clarity and fairness to my clients.


When a client decides to hire a fee-only financial planner, then there are several payment options, which include flat-fee, retainer, hourly rate, and percentage of investment assets being managed.  Regardless of the option chosen, a fee-only financial planner does not receive any form of compensation from anyone other than the client (i.e., does not receive commissions from any third party).  By the client knowing that he or she is the only person paying the fee-only planner, it provides a level of clarity.  The client can be confident that they are working with a financial planner and not a financial product salesperson.


There is no such thing as a business model that has no conflicts of interests, but the fee-only structure has fewer of them compared to other models.  Fee-only financial planners do not sell financial products to clients for commission meaning clients' fees are not tied to the sale of a product.  Since a fee-only planner has no incentive to sell any specific financial product, clients are more likely to receive more objective financial advice and recommendations.  Take the following example.

George and Jane recently hired Mike who is a fee-only financial planner.  They will pay Mike a flat quarterly fee for financial advice and recommendations across their entire financial plan.  George and Jane got married a few years ago and just had their first child.  During their life insurance planning meeting, Mike recommended that George and Jane each purchase $1 million of term life insurance, which would help support their child in the event of one (or both) of them dying prematurely.  Since Mike is getting paid for his advice to them and has no financial incentive to sell them life insurance (i.e., a financial product), they know that the recommendation is objective, and in their best interest.  Even further, Mike helped George and Jane find the most optimal life insurance products that were best for their situation.

Advancing the financial planning profession

The history of the financial services industry has shown that it started with a focus on the sale of financial products.  There has been much progress in this area as over the years, more and more financial professionals are focusing on providing advice to clients, but I think there is still a long way to go before financial planning is acknowledged as a "true profession" by the general public.  With a focus on providing advice to clients instead of just selling financial products, fee-only financial planners are likely to be competent and focus on continually learning.  As fee-only planners gain more knowledge, clients get more value, and ultimately, the general public will start viewing financial planning more as a profession.

Fee Only vs. Other Arrangements

Many advisors get paid by commission with fees earned when they recommend and sell specific financial products, like mutual funds or annuities to a client.  Others charge a management fee for their services, based upon the value of your portfolio. Some are paid a salary by the investment firm that employs them. 

A good way to look at fees earned by your advisor, no matter the method they use, is to consider the value you receive from your financial professional.  While you might feel that the hourly rate or management fee seems high, if working with your advisor helps you realize a 12 or 15% gain in your portfolio, the fees seem worth it.  

About the author

Martin Scott is a Certified Financial Planner and Founder of Lasting Wealth Principles which is based on the values of transparency, exceptional client service and continuous learning.

To read more about Martin Scott, click this link.  If you’d like to schedule a free consultation with Martin, click here.

Financial planning is an important part of estate and retirement planning, yet isn't always easy to understand. Martin Scott makes it easy for you to understand. Cara Law works with professionals like Martin to help clients with all of their estate planning needs.

We recommend reviewing your estate plan every 5 years to ensure it is up to date. If it has been 5 or more years since you have reviewed your estate plan, get in touch with Cara Law today to schedule a free review at 516-217-9200.