Question

What does the advantage and disadvatage of fee-only financial advisor and a commission-based advisor?

Answer 1

Fee only financial advisors receives their fees from the client.

A fee-only financial advisor may charge a rate that's based on a percentage of the assets they manage for you, or they might charge a flat annual fee or an hourly rate.

Fee-only financial advisors follow the fiduciary standard to always act in the client’s best interest. They carry out a deatiled analysis of investments before making recommendations, disclose any conflict of interest and give accordingly best advice.

advantage : They follow fiducary standards and provide the product which is in the best interests of client

disadvantage : They charge client on the basis of portfolio they manage for client or on hourly basis, so it may be costlier. So he may limit his services, which is not good for client

A commission-based financial advisor, on other hand, income is earned entirely on the products he sells or the accounts he opens. For a commission-based advisor, higher the number of transactions,, the more he gets paid.

Commission-based advisors do not have a legal duty to their clients; instead, they have a duty to their employing brokers or dealers. They do not have to disclose conflicts of interest.

advantage : He charges less compared to fee only financial advisor. He may have more options to offer than fee only financial advisor

disadvantage : He does not follow fiduciary standards, so he recommends investments which are in his best interests & not clients.

ANY DOUBTS, FEEL FREE TO ASK