Why is the Term Fee-Only So Important?

The term “Fee Only” refers to the way financial planners are compensated for the advice they provide. This term is growing inWhy is the Term Fee-Only So Important?popularity, but many individuals in the financial services industry use this term inappropriately. In addition, if you ask the average person what it means to work with a Fee-Only financial planner they may not fully understand the critical importance of the term.

The National Association of Personal Financial Advisors (NAPFA) defines a Fee-Only planner as “one who, in all circumstances, is compensated solely by the client, with neither the advisor nor any related party receiving compensation that is contingent on the purchase or sale of a financial product”. This type of professional relationship always places the clients best interests first and eliminates potential conflicts of interest. Fee Only compensation indicates that an advisor never accepts commissions or compensation of any kind related to the products he or she recommends.

I strongly believe that Fee-Only planning is extremely important during these uncertain economic times. A financial planner who has a financial stake in the course of action that he or she recommends to a client faces an inherent conflict of interest and cannot be considered objective and unbiased. This is true even if the planner truly believes that he or she has only the best interests of the client at heart.

Unfortunately for consumers, the vast majority of financial advisors in the United States are sellers of financial products. There is nothing wrong with the presence of product-based advisors. Their services are needed and many do indeed try to do the best for their clients. Some or all of their income may be dependent upon their ability to steer their clients to a limited number of the thousands of financial products available today. Putting aside the conflict-of-interest factor, this limiting of choices in and of itself is often enough to impact the quality of the investment advice.

A Fee-Only financial planner is well-positioned as an objective source of tax and financial planning advice. I agree with NAPFA’s belief “that many of the problems that beset Americans today in their financial affairs – including the mis-management of debt, failure to protect retirement assets and poor allocation of savings and investments – relate directly to the conflicts of interest that pervade the marketplace”. If you are in the process of taking control of your financial life, consider working with a Fee-Only financial planner to guide you along the journey to tax and financial freedom.

For more information on Fee-Only planning visit www.napfa.org or www.focusonfiduciary.com.

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About the author

Scott M. Spann, CFP®, EA

Scott Spann CFP®, EA is a Fee Only financial life planner and the founder of LifeSpan Financial Planning, LLC located in Charleston, South Carolina. Scott has been providing financial planning advice for a diverse group of clients since 2000. He is a Fee-Only financial life planner practitioner with a strong orientation in areas of tax planning and financial life planning. Scott also specializes in investment planning, retirement planning, college planning, tax planning and incorporating life planning into the financial planning process. Scott is committed to the Fee-Only model of financial planning.

Scott is originally from Greenville, South Carolina and has called the Lowcountry his home since graduating from the College of Charleston in 1997. He began his financial planning career in 2000 after completing graduate studies at The Citadel (MA, 1999) in the field of psychology. This academic background helped shape his vision to help his clients make the smartest decisions possible with their money in a client-centered relationship. Scott completed his advanced financial planning studies at the College for Financial Planning.

Scott is a member of the Nation Association of Personal Financial Advisors (NAPFA), the Financial Planning Association (FPA), and the National Association of Enrolled Agents (NAEA). In addition to promoting Fee Only financial planning, Scott also devotes a significant amount of time promoting financial literacy and recently volunteered with Your Money Bus. He is a frequent guest on the Money Matters Radio Show on 94.3 WSC FM in Charleston, South Carolina where he provides financial planning advice to listeners. Scott also provides free financial counseling to military service members as part of the Department of Defense's Financial Readiness Program.

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