The Difference Between Fee Based and Fee Only Financial Advisors

Confused about Fee Based Financial Advisors, Stock Brokers and Fee Only Financial Advisors?

Fee based means an advisor is registered with a broker dealer and a Registered Investment Advisor (RIA) firm. It also means they can sell you investment products, cash value products or annuities for a commission but can also earn fees for managing investments. When fee based advisors (AKA Hybrid) sell you investments they are not acting as a fiduciary and they do not have to disclose their compensation to you.

Stock brokers only sell securities for a commission. Brokers commonly sell annuities, cash value life insurance and mutual funds. They are only compensated by commissions and they do not have to disclose how much they are compensated or how their commissions actually come out of your pocket. When they sell you something your starting balance is reduced by their commission. This can take years to make back. 

Fee only means an advisor is only registered with a Registered Investment Advisor (RIA) and cannot sell you investment products or annuities for commissions. Fee only advisors can only manage your portfolio and offer financial planning for an hourly or fixed fee. By law, all fees are disclosed to you up front along with any conflict of interest.


There are three types of "financial advisors" - compare their motivation before you sign up.

It's unfortunate that our industry is filled with deception. There is a big difference in what motivates us and what motivates the other guys. Perhaps our motivation comparison chart will help you make the best decision for your future.

Fee Only

A fiduciary standard at all times.

Disclose conflicts of interest.

Disclose compensation.

Develop a financial plan for a fee and cannot sell you an investment product as part of that plan.

Build trust through a fiduciary relationship.

Design and manage a custom portfolio.

Fee Based (Hybrid) (Broker & Advisor Model)

Suitability standard.

No requirement disclose conflict as a broker.

No compensation disclosure as a broker and can sell you a product for a commission.

Can earn 12b-1 mutual fund back end commissions.

Direct clients into new products their managing firm is wanting them to sell.

Can develop a plan for a fee and sell products for a commission to fulfill that plan.

Their allegiance is to an insurance company or brokerage firm, not a client.

Cannot design and manage a custom portfolio as a broker. Rather, you may be sold products or a security for a commission.