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The Short Answer

The Difference Between Fee-Based and Fee-Only Advisors

Don't overlook these key differences in compensation schemes before hiring a financial advisor.

Question: I'm currently searching for a good financial advisor, but I am a little uncertain of the payment terminology. What is the difference between a fee-based versus a fee-only advisor?

Answer: This question homes in on one of the most important considerations when hiring a financial advisor: How will that person get paid? Even if you've decided you don't want to work with an advisor who's compensated based on commissions (and therefore might have an incentive to favor one type of product over an another), it's important to understand whether a prospective advisor is fee-only or fee-based.

Fee-Only Financial Advisors
Fee-only advisors derive no compensation from selling commission-based products; any compensation they receive comes from clients. That compensation structure helps ensure that the advisor is working strictly on the client's behalf and isn't inclined to favor products that may not be in the client's best interest.

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