I received a link to an article from Morningstar from my good attorney friend, Jeff Van Dyke. Jeff and I have talked over the years about the title of the article, “The Difference Between Fee-Based and Fee-Only Advisors“. I have found that even long-time clients of ours are confused, saying nothing of the public-at-large. For example, I met with a couple recently who had been working with their advisor for years, but had never received a direct answer on how he was compensated. I looked at their statement, looked up the product, and in about 30 seconds calculated that they have been paying him $5,000 per year. They were shocked! The husband replied, “No wonder he invites us to dinner at his country club each year!”
I am not saying that the advisor did anything wrong. I am simply saying that full disclosure is critical in any relationship. It builds trust so that the client will feel comfortable and confident to speak openly about their goals for the future. This will allow the advisor to create a game plan that helps them accomplish those goals. If you would like to know more about fee-based/fee-only distinctions, the article is a good and easy read.