This is an archived article that was published on in 2016, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

I may be a bit behind the curve, but at 38, the one thing constantly on my mind is planning for my future. I didn't have a specific financial goal in mind, but I knew I wanted to grow my assets, and plan for retirement. So I set out in search of help from a pro to guide me through the process and design the strategies necessary for me to reach my desired outcome.

Choosing An Advisor

It goes without saying that I needed to do my due diligence when deciding on the person, or company I would trust to take on the responsibility of managing my finances. So researching their credentials, experience and track record topped my list.

A Certified Financial Planner® or CFP® is licensed, regulated and take mandatory, continuing education courses on various aspects of financial planning. This ensures they expand their knowledge and stay up to date with changes and developments in the field, so I decided on a planner with this certification.

Advisor Pay Structures

But there is one element I almost overlooked when deciding on who I wanted to manage my assets and advise me on my investments. How my advisor is paid did not seem as important as his or her credentials, but I quickly learned that it is. Here's why.

Pay structures differ in the world of financial planning. There are commission-based, fee-based and fee-only firms and advisors. Each pay structure has its unique set of pros and cons, and learning about them made the process of choosing easier.


This immediately seemed like an attractive option, because there are very few, if any, up front costs, but after further research my concern about choosing a commission-based advisor was whether they would have my best interest at heart. That's because the commission-based advisor's duty is usually to their employer's broker dealer, not to me, the client. Their code of ethics is such that they are not required to disclose conflicts of interest.

I was also concerned that since their income was based solely on what they sold me, that they might be inclined to sell me products I did not need.

So while I liked the idea of not having to part with money up front, having an advisor I felt operated in my best interest 100% of the time took precedence.


Next I considered choosing a fee-based advisor who would receive both a flat fee for managing my accounts, as well as commission on various investment products sold to me. The fees paid to these advisors are likely lower than those operating under the fee only structure, because in addition to the long-term fees the charge, they also earn commission. The potential to earn extra from commission meant the fee-based advisor had lots of products to offer. I could spend hours on end hearing about products I felt would diversify my investment portfolio, making it stronger in the process.

However, like the commission-based advisor, fee-based advisors adhere to the suitability rule and can therefore sell me any products they believe meet my objectives without having to disclose conflicts of interest. Whether an advisor governed by this rule resists the temptation to guide me toward investments merely because they would earn a greater commission, rests solely in the character of the advisor. It's not a risk I was willing to take, particularly when it came to my retirement dollars.


So I'd pretty much ruled out choosing a commission-based, or a fee-based advisor and decided to look into whether a fee-only advisor would be the best option for me. Advisors operating under this structure do not earn a commission. Instead, a fee is charged for their services. This may be an annual fee charged as a percentage of all of the total assets they are managing on your behalf (for example 1%). Some may charge a flat fee for a financial plan. And others charge an hourly rate.

As a small investor, these options seemed costly. Additionally, I felt the advisor earning a percentage of my total assets may be less inclined to encourage withdrawals since a decrease in my account balance also means a pay cut for them.

On the other hand, what made the fee-only advisor attractive to me was that there are no hidden costs. And unlike commission and fee-based advisors, fee-only advisors operate as fiduciaries. This means that all decisions they make, or advice given pertaining to my assets and investments must prioritize my interests.

It also means that fee-only advisors already adhere to the recent finalization of the Department of Labor's (DOL) new fiduciary rule, which requires that almost all advisors and institutions working with retirement savers are identified as investment advice fiduciaries, and are subject to an Impartial Conduct Standard.

My Choice

For me, having a fiduciary was most important. I'm a small investor. I'm not willing to take unnecessary risks with my money, and more than anything, I want to embrace intelligent, prudent investment methodologies that help prepare me for comfortable retirement. So while I liked the idea of not having to pay an advisor upfront, and of having several investment vehicles to choose from, having an advisor who was bound by his code to always place my best interests first was my deciding factor.

Before You Decide

Knowing the pros and cons of each pay structure is a vital step toward helping you choose the financial advisor most suited to your specific needs. Ensure before deciding, that you know exactly how the advisor is being compensated, and that you know his or her track record. This information can be found in the advisors ADV, which specifies the investment style, assets under management, and key officers of the firm. The ADV is updated annually, and is made available as public record for companies managing in excess of $25 Million.

If, like me, a fee-only advisor seems like the best fit I would recommend you take advantage of the no-cost consultation at TrueNorth Wealth. Their team has over 60 years of combined experience, and their track record speaks for itself.

I'm still far from being a pro, but with their help, when it comes to investing, I can definitely say I'm now ahead of the curve.

Call TrueNorth Wealth at 801-274-1820, or visit their website.