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Fee-only vs fee-based

Fee-only usually means client fees only. Fee-based often allows commissions too. Verify with Form ADV Item 5E, the brochure, and a written question.

The short answer

Fee-only usually means you pay the adviser, and they do not also get a commission for selling you a product. The pay can be a percent of your account, an hourly rate, or a set dollar amount.

Fee-based is a looser label. The firm may charge you a fee and still get paid by a fund company, an insurance company, or a broker. A badge on a website is only a claim. Check Item 5E on Form ADV (the form the firm files), the brochure, and a written answer.

Fee-onlyFee-based
Who paysYouYou, and often a product company too
CommissionsNot part of the modelOften allowed
What proves itItem 5E, the brochure, a written answerThe same papers

What to do

  1. Open Search and open the firm page, not only the person's page.
  2. On the ADV panel, open Item 5E and write down every Yes. Item 5E is the compensation checklist. Watch 5E(5) commissions. A Yes means the firm says it takes commissions. A No does not prove every person is fee-only for every product.
  3. Read the fee and conflict pages in the brochure (Part 2A) and Form CRS if you see it. Form CRS is the short relationship summary. Item 5E names the type of pay. It does not show your rate. The rate is in the brochure. The Form ADV guide explains a code if it looks like alphabet soup.
  4. If you want the government's copy, look up the same CRD on IAPD. The CRD is the firm's ID number. If our page and IAPD disagree, use IAPD.
  5. Email this before you sign: "Do you or anyone related to you get commissions or other product payments from my account or from what you recommend?" Keep the reply with the draft agreement. A longer list is in questions before hiring.
  6. A group such as NAPFA can give you a shorter list of firms that say they are fee-only. That list is a membership list, not the government filing. Check each name here and on IAPD. See association directories.
  7. Turn the quote into dollars. Fee-only can still be 1% of the account every year. See flat fee vs AUM.

What to look for on Best Investors

  • Item 5E rows. These are Yes or No answers about how the firm gets paid. Many firms mark more than one Yes because different services use different pay.
  • 5E(5) commissions. This is the clearest box for pay tied to a sale. Also look at Item 5B (people who are also brokers), Item 6A (other businesses), and Item 8 when those show up.
  • Brochure and Form CRS links. Read the fee schedule there. Do not stop at a "fee-only" line on the homepage.
  • Claim badge. Someone at the firm claimed the page. That does not mean we checked their pay.
  • The search list. It shows offices near you. Being near you does not tell you how they get paid.

There is no fee-only switch on this site. You build the filter from Item 5E, the brochure, and the firm's written reply.

Common mistakes

  • Treating "fee-based" and "fee-only" as the same words.
  • Stopping when 5E(5) says No, and never asking about insurance, mutual funds, or a sister company that gets paid.
  • Thinking a "fiduciary" line on the site tells you how they get paid. The duty and the paycheck are different questions.
  • Missing a second license. The same person can give advice and also sell products.
  • Treating a claimed profile as proof of fee-only.
  • Stopping at a NAPFA list, or a similar membership list, without opening the filing.

Related questions

Is fee-only the same as fiduciary?

No. Fiduciary, for an adviser, means they have to be careful and put you first. Fee-only is about who pays them. A firm can file Form ADV and still mark commissions on Item 5E. A fee-only firm can still have other conflicts, such as a sister company, referral pay, or perks from a broker. Read the pay boxes and the conflict pages.

What does fee-based usually mean?

In ads, fee-based often means the firm charges you a fee and may also earn a commission or a payment from a product company. The government does not define fee-based as "the same as fee-only." Ask which payments apply to your account.

If Item 5E(5) is No, am I done?

Not yet. Item 5E is what the firm reported, and it covers the firm, not every side deal. A related person, an insurance license, or a broker affiliate can still matter. Read the brochure, then send the commission question above. If the person is also a broker, check BrokerCheck and IAPD.

Should I start with NAPFA or a similar list?

You can. NAPFA and groups like it list members who follow that group's rules. The list is a shortlist. It is not every registered firm, and it is not the filing. After you have names, check Item 5E and the brochure here, then check the same firm on IAPD. See association directories.

What should I email before I sign?

Send: "Do you or anyone related to you get commissions or other product payments from my account or from what you recommend?" Then ask them to list every way they could get paid, including sister companies. Ask for the answer in email, not only on a call.

Limits

This page is not legal advice or investment advice, and Best Investors is not the SEC. The firm filled out Form ADV. We do not audit the fee they quote you. Item 5E tells you the type of pay, not the dollar amount.

If our page and IAPD disagree, use IAPD. Pages here update after we load the public files, so IAPD can be newer for a few days.

"Fee-only" and "fee-based" are not boxes on the form. They are labels firms use. Your check is the filing, the brochure, and a written answer.

Sources

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