What does it mean when advisors describe themselves, or their services, as fee-only, fee-for-service, or fee-based?

Advisors Edge Report, by Marc Lamontagne, CFP, R.F.P., FMA
February 2009

It’s a question investors are asking, so those of us in the industry need to hurry up and make those distinctions.

The fee-advisor market is both fascinating and confusing. That’s in part due to the fact that titles are (for the most part) clearly de- fined in other countries such as the U.S. and UK, but no regulatory or industry body in Canada has ever attempted to define the terms. In fact, there’s no point of reference to even begin with, unless we use a foreign source.

It’s also unclear whether the moniker reflects how an advisor is compensated in general or how a client pays for a particular service.

Besides, are we talking about compensation or licensing? As a fee advisor, I frequently get calls from prospective clients who say they’re looking for a fee-only financial advisor because they don’t want to be sold anything.

There still exists an “us” and “them” myth – the misconception that you’re either in one camp or the other. The reality is the majority of financial advisors are neither compensated 100% by fees, nor 100% by commissions. In my own case, I still earn about 1% of revenue in commissions.

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