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 Motivation

Do what is right for the client. 

Help the client understand what they actually need.

Build trust through a fiduciary relationship.

Disclose fees so the client knows what they are paying for.

Typically, design and manage an actual portfolio of funds, stocks, bonds or CD's.

Study the economy, markets and look out for clients during the various economic cycles.

Fee Based / Broker Motivation

Sell you what makes them the most commission.

Direct clients into new products their managing firm is wanting them to sell, regardless of client suitability.

Contact the client when they have something to sell. 

Their allegiance is to an insurance company or brokerage firm who puts a product sales commitment on them. 

While many salesmen are well intentioned they may not be well informed or educated in the financial planning process or how to design and manage a real portfolio because they only sell products and move on.