What does it mean to be a Fee-Only financial advisor?
Fee-Only financial advisors and firms receive no sales-related compensation or incentives. They are compensated by the fee the client pays. Fee-Only financial advisors are most often compensated as a percentage of assets (AUM), though also may be paid hourly, as a retainer, or as a flat fee, depending upon the planner you choose.
A commission-based financial advisor receives commissions or other forms of compensation from financial product providers for recommending and selling their products. This can include mutual funds, insurance policies, annuities, and other financial products. The amount of commission that a financial advisor receives can vary depending on the financial products they are selling and the company they are working for. It’s important to note that commission-based financial advisors are not required to disclose the amount of commission they receive on the products they sell. This can make it difficult for investors to fully understand the potential conflicts of interest that may exist when working with a commission-based advisor. Fee-Only financial advisors do not receive commissions and are compensated through a fee-for-service model. This can provide greater transparency and reduce the potential conflicts of interest that may exist with commission-based advisors.
Fee-based advisors are where it can get complicated. Some advisors are primarily paid directly by the client, but then also might receive some compensation from insurance policies they sell to their clients or other investment products they recommend, like a specific fund or annuity. Regardless of how an advisor is compensated, it’s important that they are transparent about their fees and any additional compensation they may receive.
How are we compensated?
At Walkner Condon we use the assets under management (AUM) model. We get paid based on a percentage of a client’s assets that we manage. This fee covers not only investment management, but also financial planning. We do not charge a separate fee for financial planning services. This fee per account that we receive is the only way we generate revenue, which is what makes us a Fee-Only firm.
What does it mean to be a fiduciary?
A fiduciary is someone who manages money or property for someone else. When you are named a fiduciary, you are required by law to manage the person’s money and property for their benefit, not yours.
An important distinction is the difference between the suitability standard and fiduciary standard. The suitability standard requires brokers and investment advisors to recommend investments that are suitable for the client. However, they are not required to act in the best interests of the client; whereas a fiduciary is required to place their clients’ best interests ahead of their own.
At Walkner Condon, all of our advisors are fiduciaries for our clients.
What is a Certified Financial Planner (CFP)?
A CFP (Certified Financial Planner) is a professional designation granted by the Certified Financial Planner Board of Standards (CFP Board). In order to earn the CFP designation, a candidate must complete rigorous education and training requirements, including a bachelor’s degree from an accredited institution, completion of a CFP Board-registered education program, and passing a comprehensive exam. CFPs must adhere to ethical and professional standards, including a fiduciary duty to act in the best interests of their clients. CFPs must also meet ongoing continuing education requirements to maintain their certification.
The CFP Board has a great list of questions to ask when you are looking for a financial advisor.
What does it mean to be an independent advisor?
Being independent means an advisor isn’t employed by an investment or insurance company. Advisors who aren’t independent are typically incentivized or limited by using only their employer’s investments or product offerings.
At Walkner Condon we have an independent relationship with TD Ameritrade and Schwab. They are used as a custodian for our clients’ assets. We manage the investments on behalf of our clients while the custodian holds and safeguards the assets. Sometimes we may recommend specific investment strategies, and the custodian will execute the trades and ensure compliance with regulatory requirements. The custodian acts as a back-office support, handling administrative and operational functions such as trade settlement, record-keeping, and compliance.
Where can I find information about a firm’s fee structure and business?
Form ADV is a document that provides information about a firm’s business, including details about their ownership structure, business practices, services offered, and fees charged. Registered Investment Advisors (RIAs) are required to file the ADV with the SEC and provide a copy to each of their clients on an annual basis. The ADV is also publicly available through the SEC’s online Investment Adviser Public Disclosure (IAPD) system, which allows investors to search for and view information about RIAs and their disclosures.
Here is a link to our Form ADV
What are the next steps if I want to become a client?
Schedule an introductory meeting with one of our advisors. Our initial meetings do not have any cost or obligation. Usually, this meeting lasts about 45 minutes and is designed to let you get a feel for how we work with clients and discover what you would like to accomplish. We will mutually decide after that meeting if we would like to continue on to further conversations. This initial onboarding process often takes 1-3 additional meetings depending on the complexity of your personal situation.
– Alicia Vande Ven Certified Financial Planner™
You should always consult a financial, tax, or legal professional familiar about your unique circumstances before making any financial decisions. This material is intended for educational purposes only. Nothing in this material constitutes a solicitation for the sale or purchase of any securities. Any mentioned rates of return are historical or hypothetical in nature and are not a guarantee of future returns. Past performance does not guarantee future performance. Future returns may be lower or higher. Investments involve risk. Investment values will fluctuate with market conditions, and security positions, when sold, may be worth less or more than their original cost.
ABOUT THE AUTHOR
Alicia Vande Ven, M.S.
FINANCIAL ADVISOR, CANDIDATE FOR CFP® CERT.
Alicia Vande Ven, M.S., Candidate for CFP® Certification, is a fee-only, fiduciary financial advisor who works with clients locally in Madison, WI, and around the country.