Behind The Scenes Look At A Fee Only Financial Advisor

Fee Only Financial Advisor
“Not every financial advisor is created equal.”
— Derive Wealth

Behind The Scenes Look At A Fee Only Financial Advisor

When I decided to become a Financial Advisor, I didn't even know what fee only meant.  I had no clue.

During my first month on the job it became crystal clear what fee only meant.  And I didn't qualify.

I now have the privilege to call myself part of a select, yet growing, community of forward thinking advisors who can truly call themselves fee only.  Let me explain what that means and how it establishes the foundation for the financial advice I give. 
 

What Fee Only Means To You

You can have peace of mind that your advisor does not receive commissions for selling products.

Why is this important?  Products themselves are not the issue, nor are the commissions.  It is the incentives they bring that creates a big problem.

There are herds of financial advisors out there that provide financial advice by selling products. I call this the "carpenter with a hammer" syndrome.

Carpenter Syndrome

If you give a carpenter a hammer, everything will start to look like a nail. He or she will walk around looking for something to nail down. 

Similarly, if you incentivize financial advisors with commissions for products they sell, every client looks like a dollar sign.

Unfortunately I've seen this first hand.  I've worked for a company where the ultimate goal was to sell more insurance.  Worse yet, "financial planning" was the method to do so. 

Want to buy a home?  Cover yourself with a life insurance policy first.  Need to save for kids college?  Do so within a life insurance policy.  Want some additional retirement income?  Do so with a life insurance policy.

See how this can get problematic real fast?

Fee only financial advisors take this concern off the table.  You don't have to worry about the carpenter with a nail syndrome.  You can rest assured there will be no hard sell at the end.
 

What Products You Will Be Offered

I do sell a product.  Just not how you would normally think of it.  The product I sell is my financial plan.  

This may be a slight play on words, but I point this out as to how far off the deep end the financial industry has become.

You would think this would be obvious.  You may be a future client looking to organize your finances, establish a good roadmap, and plan a better future.  You seek out the assistance of a financial advisor, but they are not fee only.

You go through the entire financial planning process, and you end up with recommendations to buy a life insurance policy and an annuity.  This is called product driven advice.

The Real Product That Matters

There is a better way.  It's called plan driven advice.

The financial plan I create is geared towards taking a deep dive into your personal situation.  Every area that is relevant to you is examined and explored.  Combined with the goals you outline, a roadmap is established for you to follow.

Check out the details of what a fee only financial plan looks like.


What Recommendations You May Receive

You will receive tailored recommendations designed to be in your best interest.

That means relevant advice aimed to help your retire, lower your taxes, get out of debt, plan for a family, or start a business.  Really anything you can dream up, you can plan for.

I break down the recommendations I give into 3 distinct categories.

3 Categories of Recommendations

1. Education: The rationale behind smarter financial decisions

2. Action: Specific changes you can implement right away

3. Product: Products are all bad!  There are times when you need them.

Here are a few examples.  If you are enrolled in your company's 401k but don't know if you are saving enough, the education recommendation kicks in.  I would educate you on the pros and cons of saving more and determine the specific level right for you.

If you are currently in debt, the action recommendation kicks in.  I would give you specific actions to take to reduce debt and make sure you stay out of it.

If you just started a family or bought a house, the product recommendation kick in.  You may need to get life insurance (did I really just say the life insurance word?)


What You Can Expect To Pay

The financial plans I create are paid for on a flat fee monthly subscription based model.  

The pricing is fully transparent and known upfront.  Check out my pricing structure.

This creates two main benefits.  First, you know exactly what you are paying for.  No more guessing or reading the fine print.  Second, your fee is not dependent on how much money you have or make.  It's solely based on the complexity of your financial situation.

To contrast, most financial advisors do not charge for their financial plan.  It is "free."  They do this as they make money in sometimes less obvious and transparent ways.

3 Additional Ways To Pay For Advice (Not all are good)

Compare fee-only with the following models:

1. Insurance Company (commissioned advisor) Advice: Offer a free financial plan, but make money on commissions (selling annuities and life insurance)

2. Financial Institution/Bank (salaried advisor) Advice: Offer a free financial plan, but make money by creating deeper relationships (open more bank accounts, deposit more money, take out a loan, open a credit card, etc.)

3. Independent (fee-based advisor) Advice: Offer a free financial plan, but make money by charging you a percentage fee on your investments (1% charge for them to manage your portfolio.)

There is nothing inherently wrong with the 3 methods above. You just need to know what you are getting into. 

If you work with a commission financial advisor, be prepared to pay for your advice by buying products.

If you work with a salaried advisor, be prepared to pay for your advice by getting more involved with their company's products.

If you work with an independent fee-based advisor, be prepared to pay for your advice by paying a percentage of your investments.


What Promises I Make

Actually it is not a promise, it is my legal obligation.  I must provide financial advice in your best interest at all times.  This is called a fiduciary duty.  It simply means I am legally responsible for the advice I give.

Here is where the fee only title really starts to hit home.  You can be a fiduciary, but still work on commissions and sell products.  How is that possible?

Being a fiduciary simply means you are acting in your clients best interest.  No one says life insurance or annuities are not in your best interest.  They very well could be. (argumentative, I know).

Best of Both Worlds

However, being a fiduciary and a fee only advisor means you work in your clients best interest and also don't receive commissions for any products.

A fiduciary that is also fee only is, in my opinion, the purest form of financial advice.  


What Takes A While To Get Used To

To start a relationship with an advisor who is fee only and works solely in your best interest, often times they run their own firms. Which means the name and brand may be new to you.

In the perfect world, all financial advisors would strive to this level.  You would think the large institutions and big brand names would already be here.

But, a sad dose of reality, large institutions and big brand names are not in the game to give fee only advice.  They are in the game to sell their products.  Many times over.

Fee only advisors usually create a family like atmosphere to help make their brand stand out.  You are not one customer out of millions.  You are one client out of a select family.

This environment is hard to replicate in the body of a large corporation.


What You Can Expect From Derive Wealth

Our mission is to change the way financial advice is delivered.  

We do so by:

1. 100% Transparent: Everything from how your financial plan works to what you pay is disclosed and discussed.

2. Flat Fee Pricing: You pay based on the complexity of your situation, not the size of your accounts or how much money you make.

3. Custom Financial Plan: We hand write each financial plan tailored to your personal situation and goals.

Sound too good to be true?  Join the community of individuals, families, and business owners who have experienced a better way to plan their future.  Get in touch with us below.

 

Derive Wealth is an independent, 100% fee-only financial planning firm located in Pasadena, CA.  We specialize in creating personal financial plans designed to organize your life, get you to your goals, and take the worry out of your money.  We don't sell products and don't work on commissions. Instead, we provide financial advice you can believe in.