"Fee-only" vs. "Fee-based"

A key question that you should always ask your advisor is how he or she is being compensated, and how much.  Even though "fee-based"  and "fee-only" advisors appear to be similar, there is a significant difference between the two:
  • Fee-only -- Advisor is compensated solely by the client, through either asset management fees, hourly fees, fixed price financial planning fees, or a combination of these.
  • Fee-based -- Advisor is compensated by a combination of fees and commissions on products sold to clients.
The National Association of Personal Financial Advisors (NAPFA), an organization of fee-only advisors, includes as part of its fiduciary oath:

The advisor, or any party in which the advisor has a financial interest, does not receive any compensation or other remuneration that is contingent on any client's purchase or sale of a financial product.  The advisor does not receive a fee or other compensation from another party based on the referral of a client or the client's business."

Fee-only advisors reduce the possibility of a conflict of interest because their investment recommendations are not tied to any compensation resulting from the client purchasing that investment.  Their only compensation comes directly from the client in the form of periodic fees.  They do not receive any compensation from third parties -- insurance companies, securities firms, brokerages, asset management firms, etc. 

Coromandel Wealth Management is a "fee-only" firm, and we charge a fee that is calculated from client assets under management and assessed quarterly.  This fee covers all services that we provide for our clients, not just investment management. 
The formula for our fee is found on this Web site under the "Client Fees" heading. 

This fee covers all of the services that we provide to our clients, including investment management, retirement planning, estate planning, insurance coverage review, and tax reduction strategies.  If a client requires a financial planning project that requires a level of effort over and above that which is normally provided to clients, we will provide a proposal based on an hourly rate or a fixed fee.

                                     Coromandel Wealth Management    15 Muzzey Street    Lexington, MA  02421    (781) 728-9001                 CWM © 2020