The term "Fee-Only" refers to the method of compensation for the financial advisor. Fee-only advisors are compensated solely by fees paid by their clients and do not accept commissions or compensation from any other source. At Tapparo Capital Management, we believe that there is a significant "conflict of interest" if an advisor stands to gain financially from the purchase of any product he or she recommends to their clients. That is why when Andrew Tapparo founded the firm in 1997, he purposely chose to do business as an independent, fee-only firm. We act as a fiduciary; we are fee-only and do not accept any commissions. These are two important ways we are different from traditional financial advisors.
As fee-only advisors, we work for you. We provide guidance based on what is best for you. Our recommendations are made without financial enticements to us, since we do not receive any additional compensation for any recommendations. This independence is only available from a fee-only advisor.
Because we are fee-only advisors, we work solely for you and are compensated only by a previously agreed upon fee. This assures you that we are completely objective in our recommendations to you. We do not accept commissions or receive any other compensation for recommending specific products. We simply develop and implement financial and investment plans that help you achieve your financial goals. The result is an unbiased overview by professionals who are working solely for you. Several financial publications have also recognized the value of fee-only financial advising.
NEWSWEEK - Jane Bryant Quinn
"Financial Planners who take commissions have a built-in conflict of interest...even with disclosure, my choice would be a fee-only planner."
"Start with the general practitioner...a Financial Planner (whose) compensation should be from fees alone."
"The most important matter is how the planner is compensated. Hire the planner who...has no financial stake in (your) investments."
On the other hand…..
Some financial advisors are compensated entirely by commissions from the providers of products that they recommend and sell. Others, referred to as "Fee-Based" or "Fee-Offset", charge both a fee and receive commissions from selling products. This creates a conflict of interest since different products pay different commissions. It becomes difficult for the customer to know if a recommendation is being made because it is the best choice for the customer or because it pays a higher commission to the advisor than another product.
Any advisor who works for a broker-dealer (they are easy to spot since they must have a disclosure like "Securities offered through..." on a business card and letterhead) also has a conflict of interest. While they may call themselves fee-only, there are still potential conflicts of interest. Most mutual funds, insurance companies, and others pay the broker-dealer to have their product made available for their clients - the broker - to sell to the customer - you.
To ensure that your interests are being placed above your advisor’s, insist on a fee-only relationship.
Never Too Soon
Did you know that if you have been in the workforce for awhile, you can check your Social Security statement by accessing it online (https://www.ssa.gov/myaccount/)? It’s true.
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