Fee-only advisors put the client's interest first. Unlike commission-based advisors, their compensation is not influenced by commissions. Commission-based advisors may encourage their clients to buy certain products that may be more expensive when cheaper alternatives exist because they profit from those sales.
Fee-Only: Typically advisors that have a legal fiduciary obligation to act in their client's best interest.
Commission-Based: Often used by brokers who act as salesmen. They have no fiduciary obligation.
Fee-Only: Compensated through a flat fee, hourly rate, or a percentage of assets under management.
Commission-Based: Paid by the client but also compensated based on the products they sell.
Fee-Only: Conflicts of interest are less likely to exist because advisors do not profit from the products they recommend or sell.
Commission-Based: Conflicts of interest are more likely to exist.