Fee only advisors receive compensation solely from their clients. They do not sell products or receive commissions. Fee only advisors charge a fee for their services based on a percentage of the assets under management, or they may charge a flat fee or hourly rate. Fee only advisors can prioritize their clients because they can have fewer of the conflicts of interest found in fee based financial advice in Minneapolis, MN.
Fee based advisors are frequently brokers who sell investment products. They may charge a fee, but they may also receive commissions from product sales. The commissions they receive for selling their products can lead to a conflict of interest in choosing which investments are best for the client’s situation.
Fee Only Advice under the Fiduciary Rule
Fee only advisors may be more upfront about their fees. They can’t receive compensation from other sources, like commissions. Fee-only advisors are often fiduciaries who comply with a more rigorous “fiduciary” standard under the law. They are obligated to put the interests of their client first. Fee based advice in Minneapolis MN does not have the same obligations. Fee based advisors comply with a less rigorous “suitability” standard. They only must help their clients make suitable investment decisions, not decisions in their client’s best interest. They also don’t have to disclose how much they receive in commissions.
Who is a Fiduciary?
Anyone can call themselves a financial advisor. However, only Registered Investment Advisors are held to a fiduciary standard under the Securities and Exchange Commission, and they offer fee only advice.