Arbor Wealth explains fee-only relationship with clients

Arbor Wealth
Margaret McDowell
Published: Thursday, October 24, 2013 at 15:03 PM.

It seems like every professional financial journal that we peruse is referencing investors choosing to work with fee-only advisors who serve as fiduciaries to their clients.  We asked Margaret McDowell, ChFC®, AIF® of Arbor Wealth Management about these distinctions.

Question:  It seems that fee-only advisors who serve as fiduciaries to their clients are gaining more traction in the investment advisory industry. Why?

Answer:  Investors are becoming more knowledgeable and sophisticated. Many investors who are interviewing potential advisors know prior to the meeting that they want a fee-only investment advisor who will serve as a fiduciary to them.  Investors want an advisory relationship where their best interests are the advisor’s only concern. And savvyinvestors who are interviewing potential advisors often begin with the question, “Are you a fiduciary?” 

Question: What is the difference between a fee-only and fee-based advisor?

Answer: A fee-only advisor accepts no commissions of any kind, from any source, and is compensated solely by his/her clients. For instance, a fee-based advisor can place client assets in a parent-company mutual fund and receive a sales commission, in addition to his/her management fee.

Another basic difference is that fee-only advisors do not sell products of any kind. A fee-based advisor or stockbroker may sell annuities, life insurance policies or other financial products that generate additional commissions. 

Question:  What does the term fiduciary actually mean?



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