A fee-only advisory firm is paid only by its clients. Its income comes from fees the client pays directly, usually a flat annual fee, a retainer, a percentage of assets under management or advisement, hourly or project fees, or a combination. It receives no commissions, no referral or placement fees, no revenue sharing from fund companies and no payments from custodians. Because the firm earns the same whatever product, manager or custodian it recommends, its advice is not shaped by what pays it more.

The Common Fee-Only Structures

  • Flat annual fee or retainer. A fixed amount based on the scope and complexity of the work, often reviewed each year. It does not rise or fall with markets or asset levels.
  • Percentage of assets. A fee calculated as a percentage of the assets the firm manages or advises on, often on a sliding scale that declines as assets grow.
  • Hourly or project fees. Used for defined pieces of work, such as a financial plan or a provider review.
  • Hybrid arrangements. For example, an asset-based fee with a minimum or a cap, or a retainer plus project fees.

Each firm’s fee structure is described in Item 5 of its Form ADV brochure.

Fee-Only vs. Fee-Based vs. Commission

  • Fee-only: paid only by the client.
  • Fee-based: charges advisory fees and can also earn commissions or other third-party compensation. The names are similar, but the incentives are not.
  • Commission-based: paid mainly through commissions on products and transactions.

Ask a firm which of these describes it, and confirm in its Form ADV.

Incentives in Each Fee Model

No fee model is free of incentives. Asset-based fees reward the adviser when assets grow, which aligns with investment success but can make neutral advice harder on decisions that reduce assets under management, such as paying down debt, making large gifts or funding a foundation. Flat fees remove that pressure, but should be reviewed so they stay matched to the work. Hourly fees can discourage clients from calling. Knowing the incentive helps you ask better questions.

Looking at the Total Cost

The advisory fee is only part of what a family pays. Underlying fund and manager fees, private-fund fees and carried interest, custody, and trading costs all add up. A fee-only adviser should be willing to show all of these layers. Investor.gov’s guide to understanding fees shows how much difference they make over time.

Does Fee-Only Mean Fiduciary?

Not automatically. Fee-only describes how a firm is paid; fiduciary describes the legal duty it owes. Registered investment advisers are fiduciaries to their clients, so a fee-only registered adviser is both. It is still worth asking for both in writing.

Questions to Ask About Fees

  • Are you fee-only, or do you or any affiliate receive other compensation?
  • How is your fee calculated, and what exactly does it cover?
  • What will our total annual cost be, including all underlying fees?
  • How and when can the fee change?

How WE Family Offices Is Paid

We are paid by our clients and only by them. We are not paid any commissions or incentives by any manager, service provider or financial firm, and we do not charge extra for one thing or more for another. Families pay only the fee we agree to.

Because every family’s Wealth Enterprise® is different, each family’s service is customized. Our preferred method of pricing is a flat fee that reflects the specific nature of the family’s wealth and the scope of services it needs. We are also non-discretionary advisors, which eliminates sales-based compensation and keeps families in control of their decisions.

Sources