Fee-Based Planning

With fee-based planning, investors pay their advisor for financial advice based on the value of their investments – not on the number of transactions. A fee-only financial advisor charges the investor only for advice and/or ongoing management; the advisor does not receive commissions on the actions he or she takes on the investor’s behalf. This arrangement may minimize conflicts of interest and remove the perception that advice is influenced by the commission made on the transaction. Essentially, fee-based planning aligns the investor’s goals with those of the advisor: if the investor’s assets grow, advisor compensation increases; if assets decline, the advisor’s revenue declines.

Potential Advantages

For Advisors
  • Ongoing revenue stream.
  • Business diversification and expansion opportunities.
  • Improved investor retention. Fee-based advisors often spend more time with their clients than their commission-based counterparts. Therefore, investor relationships may be deepened and strengthened, which leads to increased investor satisfaction and trust.
  • Increased time to focus on cultivating existing and new investor relationships.

Many fee-based advisors find their strength lies in nurturing relationships and creating an overall financial strategy for their investors, rather than portfolio management. Therefore, many choose to outsource the portfolio management function of their business to third party money managers like CLS.

CLS has nearly 30 years of experience helping advisors transition their businesses to the fee-based model. We suggest beginning with current clients, and those most open to changing their fee structure. Prior to starting the conversation, advisors should reevaluate their financial objectives and ensure the investors are eligible for CLS’s advisory service. The conversation about switching to a fee-based model should begin with education on the benefits of fee-based service.

For Investors
  • Aligned goals. The advisor’s incentive is to grow the investor’s account.
  • Reduction of bias of investment recommendations, since the advisor is not paid commissions.
  • Fewer conflicts of interest.
  • A dedicated team of professionals, from the financial advisor to CLS’s portfolio managers, who are monitoring portfolios and making timely adjustments if market conditions warrant.
  • The financial advisor has a fiduciary responsibility to act in their investor’s best interest.
  • Advice that goes beyond specific investments. Many fee-based planners perform integrated holistic financial planning services that go beyond just choosing where to invest.