Frequently Asked Questions

  • What is Fee-Only?

    “Fee-Only" used to mean being compensated by fees, not commission. It now describes someone who has minimized conflicts of interest and works only for the client.

    The most differentiating question you can ask a financial professional is how are you regulated?

    How an advisor answers that question illuminates who is a fiduciary (legally obligated to work only for you) and who, under the law, is a salesperson, obligated only to meet a sales suitability standard.

    The fee-only approach to financial planning has been endorsed by the AARP and the Consumer Federation of America.

    “Try to use a planner whose self-interest is aligned exclusively with your own... Consumer Reports continues to believe that fee-only planners remain your best option. Depending on the skills of the planner you hire [and] how entangled your finances are... a comprehensive financial plan can cost anywhere from $1,000 to $20,000–or, if you believe the ads of many brokerage firms and insurance companies, nothing at all. While a “free” or cut-rate plan can hold down the initial cost, it introduces an obvious conflict of interest. Our reporter discovered that some planners whose earnings derive mainly from commissions pressed her to buy costly insurance policies. Or they pushed for investment in new mutual funds that had no track record, but which paid the planners selling them.” ~ Consumer Reports

    “The most important matter is how the planner is compensated. Hire the planner who... has no financial stake in [your] investments.” ~ Forbes

    “Financial planners who take commissions have a built-in conflict of interest... Even with disclosure, my choice would be a fee-only planner.” ~ Jane Bryant Quinn

    “Start with . . . a financial planner [whose] compensation should be from fees alone.” ~ Money magazine

  • What is Fiduciary?

    Black’s Law Dictionary describes a fiduciary relationship as “one founded on trust or confidence reposed by one person in the integrity and fidelity of another.” A fiduciary has a duty to act primarily for the client’s benefit in matters connected with the undertaking and not for the fiduciary’s own personal interest. Scrupulous good faith and candor are always required. Fiduciaries must always act in complete fairness and may not ever exert any influence or pressure, take selfish advantage, or deal with the client in such a way that it benefits themselves or prejudices the client. Business shrewdness, hard bargaining, and taking advantage of the forgetfulness or negligence of the client are totally prohibited by a fiduciary.

    As fiduciaries, financial planners must make fair and complete disclosure of all material facts and must employ reasonable care to avoid misleading their clients. The utmost good faith is required in all their dealings. Simply put, fiduciaries must exhibit the highest form of trust, fidelity and confidence, and are expected to act in the best interest of their clients at all times.

    The distinction between a financial planner with a fiduciary interest and a salesperson is crucial. A financial planner, under common law and by some statutes, is a fiduciary. A financial planner must always provide services and advice in the best interests of the client. Whereas salespeople may have their own motives and interests at heart and offer goods and services for a price, a fiduciary must serve the client, if necessary at the cost of the fiduciary’s own interests.

    It is generally believed that fiduciaries perform their trades for reasons other than money and feel a sense of responsibility that goes beyond simply making a living. To paraphrase Supreme Court Justice Brandeis: “It is an occupation which is pursued largely for others and not merely for oneself. It is an occupation in which the amount of financial return is not the accepted measure of success.”

    Many consumer advocates believe that fee-only planners alone can fulfill a fiduciary duty, because fee-and-commission planners receive commissions from the advice they give.

  • What is

    “Comprehensive” means that an advisor looks at the client’s entire picture to determine the best approach to meet the client's needs. This approach is vastly different from what brokers and pure money managers do. We have the firm belief that by understanding the full scope of a client’s life, we are much better positioned to be able to tailor the financial advice and portfolio appropriately. Financial Planning is the life long process of integrating personal values with the management of both human and financial capital.

    How does financial planning help me?

    Financial planning provides better financial understanding, better and more informed personal choices, more financial safety, more knowledge about social and economic policies and higher lifetime wealth. Simply put financial planning offers peace of mind and more effective progress towards your goals.

    How should someone select a financial advisor?

    • Interview at least three advisors

    • Develop a list of advisors to consider from friends and other referral sources, such as Financial Planning Association (FPA).

    Use these differentiating questions:

    • How are they regulated? Aim to work with someone who has a legal obligation to put your interests first.

    • Do they just manage money or do they also provide comprehensive planning? (Money managers don't look at your whole picture.)

    • Do they pay or receive referral fees? Look for a 'no' answer.

    • Do they own a partial interest in another firm? Be wary if the answer is yes and referrals go to that firm.

    • Does some other entity own all or a part of their business? Be wary if yes. The owner can exert pressure to keep margins up aka having the advisor talk less with clients.

    Get the Part 2A&B of Form ADV, the government mandated disclosure document. Part 2 comes from the advisor.

    Then do a gut check for competency and chemistry: Do you want to work with this person over the long-term on issues of great personal importance to you?

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