What Does “Fee-Only” Mean?

You’ve hired a professional to provide services for you. Hopefully, you have some idea of what these services will cost. Most contractors, it’s said, will finish their work in twice the time and at twice the cost that’s quoted. But, hey, if you factor that in at the start, you won’t be disappointed!

What’s opaquer is this: How is the professional being compensated? In the case of the contractor, it is often a specific line item is provided on an invoice. But is this all the contractor is making? Are they getting a ‘kickback’ from subcontractors for being selected for your project? Do they get to share in the profits of the material supplier? The answers potentially matter to you, because as the consumer, you want to make sure the contractor is selecting sub-contractors and material provides on their merits as the best fit for your project – not solely because they provide the biggest kickback. You certainly wouldn’t want a doctor prescribing medication based, in part, by the lavish dinners a certain pharmaceutical company was providing.

 

Yesterday’s crazy wind in Warrenton brought an unexpected roof job at Meridian. Luckily we have some amazing contractors so we don’t wind up with unclear invoices. Shout out to Tom from Old Dominion Specialty Construction and Fredi from Kings Contracting!

And no industry manages to hide compensation from the consumer better than our industry. Financial service companies are among the best in class when it comes to ways of hiding feed and being creative with compensation.

The potential for abuses of trust are not as significant as it was in the past. ‘Back in the day’, money flowed quite liberally from investor pockets into those of many layers of sales organizations, from fund managers through wholesalers and down to individual financial advisors. And it came in many forms. Advisors were routinely courted by fund companies who would fly them to exotic locations for ‘due diligence’ meetings that were made up of a couple of hours of product orientations among days of poolside indulgence.

Periods like the recessions in the 2000’s certainly reigned in some of the more egregious examples of soft-money compensation. At the same time, however, much of the industry, present company included, have opted to move in a direction that seeks to be completely transparent about every penny they make as Fee-Only advisors. Our Meridian client statements even breakdown very clearly how much you are paying us each month.

The obvious benefit to working with a truly ‘Fee-Only’ advisor is that advice given is more likely to be aligned with the client’s best interests. Any situation where an advisor is compensated for the sale or recommendation of a product, whether it is a mutual fund, annuity, stock or bond calls into question whether other potential solutions, perhaps more cost-efficient or suitable, have been omitted from consideration.

It’s not that any compensation structure comes without potential conflicts. Simply put, though, a fee-only advisor has far fewer conflicts, and those that do exist are far easier to disclose and assess.

Along with being fee-only advisors, we think we are unique at Meridian being independent and fiduciaries. This puts us on the same team as our clients. Ready to join our team? Schedule your discovery meeting today!

Blog Disclosure

What Does “Fee-Only” Mean?

Leave a Reply

Your email address will not be published.