Why Fee-Only Investing?

There are 3 basic models of advisor compensation in the financial services industry.

  • Sales Commissions from product sales. Commissions, markups or surrender fees are not always disclosed and often vary from product to product, running as high as 10%. Broker incentives may exist to favor certain products. Some compensation may come from contests, promotions or favors from product wholesalers or sales managers.
  • Fee-based – a fee for advice and often additional costs for commissions on product sales for implementation of that advice, especially for mutual funds, annuities and insurance
  • Fee-only –at Cornerstone Investment Services, there is a $300 one-time setup fee per client and management fees ranging from 0.6% – 1.25% annually, depending on account size. These fees are the ONLY sources of advisor income and fees are fully disclosed.

Why is a fee-only relationship so important?

  1. Advisor compensation is for ongoing advice, service and management, not product sales
  2. Transparency – a confirmation or invoice is sent each quarter. No hidden fees or markups
  3. No hidden incentives like sales promotions, awards
  4. Eliminates conflict of interest arising when different investments vary greatly in how much they pay the advisor – I receive absolutely no compensation from products
  5. Removes advisor temptation to recommend more trades for more commissions
  6. Provides advisor incentive to keep taxes and any other costs as low as possible
  7. True no-load mutual funds can be bought
  8. No-load annuities are available with no commissions or surrender fees
  9. Any commissions on stocks are at low, discount broker rates
  10. Advisor business growth comes from account growth and referrals, not commissions