How to Find a Fee-Only Financial Advisor

Fee-only and fee-based sound similar, but describe different compensation. A fee-only advisor receives client fees without commissions for selling financial products. A fee-based advisor charges client fees and may also receive product-related compensation. Ask how the firm, the individual, and related businesses are paid, and compare the answer with their disclosures.

An advisor who earns commissions has a reason to recommend certain products over others, whether or not those products are actually the best fit for you. That doesn't mean every recommendation is wrong, but it's a real conflict of interest. The fee-only structure reduces many common conflicts. It does not eliminate every conflict. A registered investment adviser still owes you a fiduciary duty, meaning they're legally required to act in your interest and tell you in writing about any conflicts that remain.

Get fiduciary duty in writing. Ask the advisor to confirm in writing, not just by saying it out loud, that they're legally required to act in your best interest. Talk is free. A written statement in your agreement is something you can hold them to. If they won't put it in writing, that's a warning sign.

Read the Form ADV Part 2A (opens in new tab). This is the advisor's official disclosure document, filed with the SEC or the state, and you can read the full thing at adviserinfo.sec.gov (opens in new tab). Ask for a current copy before signing and confirm the applicable brochure-delivery requirements. Read the section on fees and how the firm gets paid. It has to list any ties to a brokerage that sells products, and any referral deals. That one section tells you more than any website ever will.

Check product-sales compensation. Read Form ADV to identify commissions or other payments tied to selling or implementing financial products. Ask about the firm, your advisor, and related businesses, plus any referral arrangements. Ask which fee-only standard the advisor follows. A mention of commissions alone proves nothing: a brochure may say the firm does not accept them. Read who receives each payment and what triggers it.

Ask for their CRD number. Every registered advisor gets one, basically their ID number in the regulatory system. If someone can't or won't give it to you, ask why, and just search for the firm by name instead. Type the number into adviserinfo.sec.gov (opens in new tab) and check that what comes up matches what they told you. Narstar's CRD number is 337496 if you'd like to review it yourself.

Check the disclosure record. IAPD shows reportable disciplinary and other disclosure events, not every complaint or lawsuit. For a broker or someone with brokerage history, FINRA BrokerCheck (opens in new tab) provides registration, work history, and disclosures. Ask whether the firm is registered or qualifies for an exemption where you live; your state regulator can help verify that. Read each event's details and outcome. An allegation is not a finding of misconduct, and no disclosure does not prove there have been no disputes.

Won't give you a CRD number, and won't say why. Every registered advisor has one, and the record behind it is generally public. It's fine if they have to go look it up. If they dodge the question, check the public record before you go any further.

Cannot explain their compensation clearly. Fee-only and fee-based describe different arrangements. Ask who receives each payment and whether a product recommendation changes compensation. Compare the explanation with the written disclosures. Here is the difference between fee-only and fee-based compensation.

Promises specific returns or a "can't-lose" strategy. By law, advisors can't promise you a specific return or a sure thing. If someone does this in your first meeting, leave. Don't book a second one.

Pressure to sign today. Feeling rushed is a sales tactic, not a sign of a good deal. A real fiduciary doesn't need you to decide today. A good advisor relationship can survive you taking a week to think it over.

Can't tell you where your money is held or who can move it. Ask which firm holds your account, whose name is on it, and who can take money out. Then check your balance directly with that firm. At Narstar, your account stays in your name at Interactive Brokers. We can trade in it and have IBKR deduct our fee. We can move cash only between your own IBKR accounts, and only when you ask in writing. Regulators call that fee-deduction power "custody," so you will see that word in our Form ADV.

Vague about fees in writing. Your fees should be written down in the Form ADV and in your agreement. "We'll figure something out" is not a fee schedule. If you can't get an exact number in writing before you sign, you're not going to like the number you get afterward.

Most people never check any of this. That's a mistake.

How do I find a fee-only financial advisor?

Start with NAPFA's advisor search at napfa.org/find-an-advisor (opens in new tab), a directory of fee-only financial advisers. Then check anyone you find at adviserinfo.sec.gov (opens in new tab), the SEC's free public database. Read Form ADV Part 2A (opens in new tab) Items 5, 10, 12, and 14 for fees, other business, brokerage arrangements, and referral compensation, and confirm whether commissions are received rather than just searching for the word.

What should I look for in a fee-only financial adviser?

Get their fiduciary promise in writing, not just spoken. Ask for the Form ADV Part 2A before you sign anything. It shows how they're paid. Read the actual fee section instead of just searching for a keyword: many brochures mention commissions only to say they don't take any. What matters is whether the firm, your advisor, or a related company actually gets that kind of payment. Also get their CRD number and look it up at adviserinfo.sec.gov (opens in new tab) to review reportable disciplinary and other disclosure events. A clean disclosure record does not prove there have been no disputes.

How much does a fee-only advisor cost?

Fee-only advisers may charge a percentage of managed assets, an hourly rate, a fixed planning fee, or a subscription. Compare written quotes for the services you actually need, including fund expenses and brokerage charges where applicable. Every firm's real fee schedule is in its Form ADV Part 2A. A taxable account with one model portfolio pays 0.60% annually for Income, 1.00% for Trend, 1.20% for Growth, or 1.60% for Speculative. Taxable accounts with two or more model portfolios pay 1.00% on the whole account, including cash. IRAs (Traditional, Roth, Rollover, SEP, SIMPLE, and inherited) are charged a uniform 1.00% a year regardless of model portfolio mix. All fees are billed quarterly in arrears. Interactive Brokers may charge its own separate fees.

Is a fee-only advisor worth it for a small account?

The real obstacle is minimums. A lot of fee-only firms require a large balance just to open an account, which shuts out the people who could use honest advice the most. The standard minimum is $3,000 per account. SIMPLE IRA participant accounts have no minimum. Whether any advisor is worth the fee depends on what you'd do without one, and no advisor at any price can guarantee results. Investing is risky either way.

Is NAPFA the only directory?

No. Other groups run advisor directories too, with different membership rules. What makes NAPFA useful is its strict fee-only requirement. Whatever directory you use, checking is the same either way: pull the firm's record at adviserinfo.sec.gov and read the ADV. A directory just gives you names. The public record tells you the truth about them.

Can I do all of this verification for free?

Yes. IAPD, FINRA BrokerCheck, and public Form ADV records can be accessed without buying a background report. IAPD is an SEC resource. FINRA is a self-regulatory organization overseen by the SEC, and NASAA is an association of state and provincial securities regulators. Membership directories are separate from regulatory records.