What is a Fee-only Investment Advisor?
Who Would You Trust More?
When it comes to your money, which arrangement would you prefer? Working with a fee-only investment professional whom you pay directly to manage your investments? Or someone who earns commissions from selling you financial products and/or your financial transactions?
Why Work with a Fee-only Investment Advisor?
When you hire a fee-only Investment Advisor, you free yourself from the worries that can come from conflicts of interest. For example, if a meaningful portion of a financial advisor’s income comes from selling financial products to you, there may be conflicts of interest in play. Would you ever be able to fully shake the question: Is my advisor recommending something that is best for me, or for them? That question could keep you up at night.
Some companies limit the recommendations that commissioned financial advisors can make. In some cases employers require that they promote the company’s specific financial products. As a result, their recommended actions or products may not be the best possible option for your financial needs, but theirs.
However, fee-only Investment Advisors do not earn commissions on their recommendations or financial transactions. Fee-only Investment Advisors maintain a fiduciary relationship with you. This means they have a legal and ethical obligation to act in your best interest.
In contrast, a financial advisor earning commissions is not legally bound to act in your best interest. Rather, the law requires that advisors make “suitable” recommendations. Which feels more comfortable to you?
How Do Fee-only Investment Advisors Get Paid?
Here at KKRA, we charge a percentage of Assets under Management (AUM). The actual fee can vary based on the type of assets we manage. But because we hand select the individual securities for each client investment portfolio, our clients avoid the fees that come with “pre-packaged investment products”. These “products” are assembled by brokerage firms or other investment houses (such as ETFs, Mutual Funds, Alternative Investments, Private Equity Funds, Hedge Funds, Real Estate Funds, etc.). Significant fees often come with these products.
Even though it is more work for us (compared to selecting pre-assembled investment products), this process of creating custom investment portfolios keeps our client fees lower. Our custom work allows clients to bypass the broker fees and/or management fees of others’ “off-the-shelf” products.
If you are actively investing, or thinking about starting, visit with a Registered Investment Advisor. To learn more about what an Investment Advisor should do for you, click here to download our free eBook “3 Things an Investment Advisor Should Do for You”.
Anatoliy Cherevach is a Chartered Financial Analyst and a Portfolio Manager with Kunath Karren Rinne & Atkin, LLC, with over 19 years of portfolio management and security analysis experience. Prior to joining KKRA, he was a Portfolio Manager and Research Analyst with Cohen & Steers. Anatoliy holds an MBA in finance from Pacific Lutheran University. He is an active member of the CFA Institute and CFA Society Seattle.