Is your Advisor a Fee-Only Fiduciary? If not, why not?

“Are you a Fee-Only Fiduciary?”

It is a simple question to ask. The answer you receive may tell you a great deal about how your advisor chooses to work with clients. This simple, upfront question can save you time - and often money - when meeting with your existing or potential financial advisor. It is a question all consumers deserve to know the answer to and properly understand. The financial services industry however has often made getting a straight answer to this question too difficult for the public.

It is easy for an advisor to claim they are a fiduciary who acts in your best interest, but actions speak louder than words - particularly in financial services and especially when advising people on their personal wealth. Understanding the difference between a “Fee-Only” & a “Fee-Based” advisor, while seemingly insignificant on the surface, can make a huge difference for the eventual client experience. Knowing the difference and deciding if this distinction is important to you prior to beginning a financial advisory relationship is something we feel strongly about at Hudson Oak. Knowing the difference between Fee-Only & Fee-Based may help determine who you trust with your family’s wealth and financial well-being.

Below is an overview comparing these two types of advisory firms and advisors.


A Fee-Only advisor or planner is bound to a fiduciary standard when serving clients. What does this mean? This fiduciary standard requires the advisor or planner to act in a client’s best interest to the best of their professional ability.

Merriam-Webster’s dictionary defines Fiduciary (adj) as “of, relating to, or involving a confidence or trust.” The same dictionary defines Trust as “assured reliance on the character, ability, strength, or truth of someone or something.” To establish this necessary reliance on character, a transparent and honest relationship must first be established. Only then once this verification of character has occurred can the confidence and trust required to truly have a fiduciary relationship for others exist. Fee-Only advisors strive to operate as a true fiduciary for clients, which naturally means that the goals of the advisor and client are generally well-aligned and free from conflicts of interest.

The term Fee-Only itself is derived from how the advisor is compensated. A Fee-Only advisor or planner only receives compensation directly from clients for the services they perform (novel idea right?). This means they do not earn or accept any commissions for sales of financial products. Therefore, whether it be a set fee, an hourly rate or a stated percentage based on a figure, a Fee-Only advisor will only receive compensation directly from clients based on the mutually agreed upon relationship. The benefit to this model is that clients are paying for advice and wealth management, not financial products - which makes sense assuming you wanted to work with with an advisor for… well, advice or management of your wealth! You may say to yourself, “This makes sense. Isn’t this the industry standard? Why is this a big deal?” While to us at Hudson Oak, the answer is obvious, unfortunately the Fee-Only Fiduciary advisory model is in the considerable minority throughout the advisory industry.

A Fee-Only advisor may typically also be a CERTIFIED FINANCIAL PLANNER™, but beware, not all Certified Financial Planners are Fee-Only. A CERTIFIED FINANCIAL PLANNER™ must possess certain competencies, pass exams and uphold rigorous continuing education and high ethics to use the designation. Being Fee-Only is a business model decision for how an advisor may operate or be compensated when serving clients. They are separate considerations.


A Fee-Based advisor or planner is one that may be paid directly from clients for advice or wealth management, but can also earn commission from financial companies for the sale of financial products to customers. For example, this may mean that a fund company shares a portion of their collected fee with a Fee-Based advisor whenever this advisor invests client money within one of their funds. Or perhaps the advisor may earn commission from an insurance company on the sale of particular insurance or annuity products to their clients. If your advisor is a broker or works for a “broker-dealer”, they are almost certainly a Fee-Based advisor. Fee-Based advisors are held to merely a suitability standard in which what they offer (sell) to a client must be “suitable”, but not necessarily in the client’s best interest. This is different from the stricter fiduciary standard discussed above for Fee-Only advisors or planners.

Why does it matter if an advisor can sell products for commission? The existence of commissions or hidden-fees creates an inherent conflict of interest in which an advisor may be motivated to choose option A or option B for a client because one option pays the advisor more or less, not necessarily because it is the best option for a client. To some this may not matter, but it can be an important factor to many. Considering that the majority of consumers are not familiar with this distinction and have often interchangeably understood Fee-Only or Fee-Based as one-in-the-same, knowing the actual difference can be a huge issue.

Wait… What?!?

If it seems crazy to you that someone could advise your wealth while only being held to a “suitable” standard (and may not even be a CFP® or hold another similar advanced credential), we understand how you feel. Everyone should be able to work with an advisor of their choosing, but those paying for services should be willing and informed clients. Unfortunately, the “Fee-Based” term was created in part to blur the lines even further for the ordinary consumer who sees Fee-Based or Fee-Only and may fail to recognize the difference. Fee-Based firms also often have shareholders and outside ownership groups that never meet the end-client, yet establish corporate revenue goals. Therefore these advisors face natural sales pressures or motivations to meet ownership demands. Generating revenue through conflicted transactions, however that may be, can become a priority, potentially at the expense of providing quality advice.

What about Hudson Oak Wealth Advisory?

At Hudson Oak it is an easy choice for how we serve clients. We created our firm as a Fee-Only advisory firm because we believe it is the only way to properly and appropriately serve our clients’ needs in a transparent and professional manner. Even through our years of experience in the advice industry, none of our members have ever worked for commission or in a Fee-Based capacity, as it goes against the core of who we are.

We don’t believe that the existence of product selling is appropriate within an advisory relationship. This is not because we don’t believe there aren’t great financial products that can help people meet their goals - it is because of the existence the ability to sell products for compensation creates an unavoidable conflict of interest - despite the best of anyone’s intentions. The simplest decision (to us) is to have a business that will not allow such conflicts to even exist.

We desire to grow and walk with our clients and not be motivated by transactions - but rather focus on building meaningful relationships. We want to succeed as our client’s succeed and our firm’s model is proof of this intention. We combine this conflict-free model with our years of background as qualified CPA & CFP® professionals to ensure our clients receive the quality advice and guidance they deserve. Our mission is to provide clients with the higher standard of advice they deserve - not just in the quality of the advice they receive, but the model through which they receive it.

Last Words

When the entire purpose of working with an advisor is to get guidance and advice you can trust, shouldn’t the minimum standard be that the advisor is required to act in your best interest, to the best of their professional ability - without conflict? Why should you honestly expect anything less when paying for a service? Especially concerning something as crucial and personal as your wealth. Trust is the foundation upon which an advisory relationship must be built. If a client is not truly informed to know whether their advisor has taken every step to actively work with them as a fiduciary, how can the trust to openly share intimate information about your finances properly exist?

Working with a Fee-Only advisor is the standard we believe everyone deserves if its the right fit for them. However, only you as a consumer can determine which route is preferred when working with an advisor. When deciding the type of advisor to trust with guiding you and providing advice we hope that you are now better informed to make a decision that is best for you and your own financial situation.

So ask your current or prospective financial advisor or planner, “are you a Fee-Only Fiduciary?” See what they say. If the answer is anything other than a simple “yes”, take notice and understand why. You and your wealth deserve to know.

Disclosure: (“Hudson Oak”) is a registered investment adviser in the State of New Jersey. For information pertaining to Hudson Oak’s registration status, its fees and services and/or a copy of our Form ADV disclosure statement, please contact Hudson Oak. A full description of the firm’s business operations and service offerings is contained in our Disclosure Brochure which appears as Part 2A of Form ADV. Please read the Disclosure Brochure carefully before you invest. This article contains content that is not suitable for everyone and is limited to the dissemination of general information pertaining to Hudson Oak’s Wealth Advisory & Management, Financial Planning and Investment services. Statements made in this article are current to the best of the author’s knowledge only at the time of this writing. Past performance is no guarantee of future results, and there is no guarantee that the views and opinions expressed in this presentation will come to pass. Nothing contained herein should be interpreted as legal, tax or accounting advice nor should it be construed as personalized Wealth Advisory & Management, Financial Planning, Tax, Investing, or other advice. For legal, tax and accounting-related matters, we recommend that you seek the advice of a qualified attorney or accountant. This article is not a substitute for personalized planning from Hudson Oak. The content is current only as of the date on which this article was written. The statements and opinions expressed are subject to change without notice based on changes in the law and other conditions.