Fee Only vs. Fee Based

Fee Only vs. Fee Based

February 09, 2022

Whether you are searching or currently working with someone in the financial industry, one of the factors that goes into deciding who to work with is the fee you will pay.

In our industry, there are two main ways that a firm’s fees can be structured.

Fee-Only or Fee-Based.

The difference between the two can be difficult to understand (it even confuses people in our industry) and may not be immediately apparent to most people. However, understanding and knowing how the person you’re working with is being compensated should be crystal clear before making your decision.

Let’s dive into each.

Fee Only

A fee-only financial planner earns money EXCLUSIVELY through the fees that their clients pay. Please understand the importance of the capitalized and bold word above. Under this structure, a planner does NOT receive a payment from any other source.

If the planner is a CFP® and wishes for their firm to be Fee-Only, they must also:

  • Receive no Sales-Related compensation AND
  • Related parties must also not receive any Sales-Related compensation in connection with any professional services the CFP® professionals or their firm provides to the clients

 Now this is where people may get confused, as the way a Fee-Only planning firm collects their fee can differ from firm to firm. The two most popular ones are Assets Under Management (AUM) based or flat fee.

  • AUM: The fee will be collected as a percentage basis based on the amount of assets your planner manages for you. For example, if you have a $1M portfolio and the advisor charges 1%, you will pay $10,000 annually for their services.
  • Flat Fee: The planner will charge a flat annual fee for the services that they provide.

Either way, you are only being charged the one fee.


A Fee-Based financial planner also charges a fee like a Fee-Only planner would. However, unlike Fee-Only planners they may also earn money through other means such as:

  • Brokerage commissions when acting as a broker-dealer
  • Through insurance commissions
  • Selling mutual fund shares

As the CFP® board puts it, Fee-Based is the equivalent to “commission and fee”.

Understanding how the planner is being compensated is a critical factor when selecting who to work with. Whether you choose a Fee-Only or Fee-Based planner, you must make sure that they are up front and transparent with how they are charging for their services.

Now that you understand how people can be compensated in the industry, it’s time to grasp what value you are getting from paying that fee. This can be further explained in my next blog, The Value of a Financial Planner.

The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor.



Melone Private Wealth, LLC (“Melone Private Wealth”) is a registered investment advisor. Advisory services are only offered to clients or prospective clients where Melone Private Wealth and its representatives are properly licensed or exempt from licensure.


For additional information, please visit our website at http://www.meloneprivatewealth.com/


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