When I tell you Bernhardt Wealth Management (BWM) is a fee-only firm, I mean just that. Charging a fee on the assets we manage is the only way we are compensated by our clients. We do not earn commissions. I structured BWM this way because I believe it shows our clients that they can be 100% sure there are no conflicts of interest when we recommend and invest in various products. Again, because we do not earn commissions on any products, our clients can be sure we are acting only in their best interests.
But sometimes in our industry fee-only doesn’t mean fee-only. You may have read recently about an advisory firm that took the CFP Board to federal court. This firm wanted to use the term fee-only to market their firm, even though an arm of the firm sells insurance for commissions. I’m happy to report that the court ruled against the firm, siding with the CFP Board that accepting commissions, albeit in an arm of your firm, is contrary to the fee-only business model.
The ruling is a step in the right direction and the publicity the case attracted will likely prompt consumers of financial advice to ask some important questions about conflicts of interest. However, getting the answers they deserve will not be easy!
For instance, the CNBC editorial team recently presented its second annual list of the top 100 fee-only wealth management firms. However, when you look a little deeper into these firms, many are not fee-only. In fact, some commissions can be part of the compensation models for nine of the top ten firms! That’s shocking.
In my book, advisors should not be able to choose when to operate as fee-only advisors and when to operate as commissioned salespeople. At best, this confuses clients and prospects and, at worst, it is deliberately deceptive even if it is disclosed in regulatory filings. To me, fee-only means the firm and its advisors/owners will never benefit from a commission earned from the sale of any product by someone recommended by the advisor.
If you are looking for an advisor, I suggest not only asking if they are fee-only but asking when they or related companies earn compensation from any recommendation that is made. Until the industry better regulates use of this term, consumers will have to ask more questions to ensure they are working with a fiduciary who will always put their interests first, no matter what arm of the firm they are operating in!