What does a fee-only financial planner do, exactly? - MoneySense (2024)

Advertisem*nt

Ask MoneySense

By Jason Heath, CFP on September 15, 2020
Estimated reading time: 5 minutes

By Jason Heath, CFP on September 15, 2020
Estimated reading time: 5 minutes

And if they don't sell any financial products, how do fee-only planners get paid?

Advertisem*nt

What does a fee-only financial planner do, exactly? - MoneySense (1)

Photo by fauxels from Pexels

Q. How do you make money, Jason, if you don’t sell any products?
–Rob

A. Your question is a good one that I get a lot, Rob—even from people in the industry. So let me explain.

Something that I like to reinforce frequently is that I do not sell any financial products. I feel this is an important point to clarify so people do not wonder if I have a conflict of interest when they read my advice in articles and interviews.

Some financial planners make money by selling products, like mutual funds or insurance. Those products may pay them upfront or ongoing commissions, or a combination of the two. Different products pay different commissions, and their advice may be influenced by the way they get paid. That is not to say their advice may not be good, but they may have conflicts of interest.

Many consumers do not understand the difference between a financial planner, a financial advisor, or the many other financial titles that companies and individuals use to describe their role. Quebec is the only province where you need credentials to call yourself a financial planner. In other provinces and territories, anybody can represent themselves as a financial planner. Ontario is in the process of changing that—and it’s a change I welcome, being based in Ontario myself.

I am a Certified Financial Planner, or CFP, which is the most recognized financial planning designation around the world. I would consider a financial planner to be more focused on the overall financial planning process—saving, debt repayment, tax and estate strategies, retirement—as opposed to a financial advisor specializing in just one aspect, like investments or insurance.

I refer to myself as a fee-only financial planner, Rob, because I am compensated only by fees paid by my clients. I do not accept referral fees or commissions from third parties; this is a choice, not a requirement. My clients pay a project fee, an hourly fee, or an annual fee. I focus mostly on retirement planning and overall financial planning strategies, but I do different things for different clients.

For example, this week, I have five client meetings:

  • Reviewing a retirement planning projection with a portfolio manager and a newly wedded couple in a second marriage who are approaching retirement and living in Northern Ontario. They are paying a one-time fee.
  • Discussing group benefits with a new employer and a potential first home purchase for a young, single client in Toronto. They have purchased a block of hours for financial planning services.
  • A meeting to review tax and investment strategies with an incorporated business owner in the Greater Toronto Area with an online business that sells worldwide. They pay an annual fee that includes tax preparation.
  • Reviewing a retirement plan with a young couple in Calgary who are considering the purchase of a vacation property and trying to set annual saving targets. They pay an annual fee that includes tax preparation.
  • Discussing investment, tax and estate strategy with a retired lawyer in his 80s who has a corporation, and children and grandchildren living in the U.S. They pay an annual fee.

The media has really talked up the appeal of fee-only financial planning over the past 20 years since I started my career. One problem in Canada is that since titles are not regulated, anyone can call themselves fee-only. There are lots of what I would consider fee-based investment advisors, who manage portfolios and charge a fee as a percentage of the assets, and who refer to themselves as fee-only as well. But, again, there is no regulation of titles, so there is no regulatory reason someone cannot call themselves fee-only.

So it’s really tough for consumers to figure out who is who, what various financial professionals do, and how they get paid. Over the past 10 years, I have even started to use the term “advice-only,” because that differentiates things a bit more.

I sell advice for a fee, and do not get paid by anyone other than clients. I have a lot of clients I work with year after year, as well as others I work with more sporadically. I feel really privileged to be able to practice this way and not have to sell financial products or take referral fees.

I think there would be more fee-only financial planners if financial planners were considered professionals, like accountants or lawyers; instead planners are more commonly seen as salespeople. I also think consumers would be more inclined to pay financial planning fees directly if they understood the indirect costs of the embedded fees in financial products, and especially if they knew the difference between true financial planning and the most common individual component of investment management.

The good news is the way financial professionals get paid is receiving more attention from consumers and regulators. Fee-only financial planning is becoming increasingly popular as well. Transparency is good for consumers, and the demand for it is good for young financial planners who want to sell professional advice for a fee.

Jason Heath is a fee-only, advice-only Certified Financial Planner (CFP) at Objective Financial Partners Inc. in Toronto. He does not sell any financial products whatsoever.

MORE FROMJASON HEATH:

  • What a stock split means for your portfolio and tax situation
  • The best ways to help kids financially
  • Planning for retirement with little or no savings to draw on
  • What to consider when naming investment account beneficiaries

What does a fee-only financial planner do, exactly? - MoneySense (2)

About Jason Heath, CFP

Jason Heath is a fee-only, advice-only Certified Financial Planner (CFP) at Objective Financial Partners Inc. in Toronto. He does not sell any financial products whatsoever.

Comments

  1. Hello Jason,
    Thank you for your explanations on the fee based service. I deal with a bank financial advisor, so I believe the advisor must be getting some incentives when I buy certain products from the bank, am I right? If I’m right I believe there is a conflict of interest. Can you let me know what are your fees are. I am retired recently and I’m seeking unbias financial advice from such as yourself.
    thank you,
    Jim

    Reply

    1. Thanks for your comment, Jim. We’ve forwarded your query to Jason via email.

      Reply

  2. Do fee only CFPs such as Jason work province specific or Canada wide?

    Reply

    1. Hi Mari-Ann,
      We passed your question along to Jason, who responded that he has clients across Canada as well as internationally. So a client isn’t restricted to working with a CFP who is local. Hope that helps.

      Reply

  3. Can Jason recommend any fee only advisors in Windsor Ontario?

    Reply

    1. Due to the large volume of comments we receive, we regret that we are unable to respond directly to each one. We invite you to email your question to [emailprotected], where it will be considered for a future response by one of our expert columnists. For personal advice, we suggest consulting with your financial institution or a qualified advisor.

      Reply

  4. Hi Jason me and my wife are planning on retiring in the next year. We have a home in Markham, a business, a home in Florida, A fair amount in stocks. We are looking for some financial help please contact us. Thanks Dave

    Reply

    1. Due to the large volume of comments we receive, we regret that we are unable to respond directly to each one. We invite you to email your question to [emailprotected], where it will be considered for a future response by one of our expert columnists. For personal advice, we suggest consulting with your financial institution or a qualified advisor.

      Reply

  5. Hi Jason,

    Can you recommend fee-based advisors in the Calgary area?

    Thank you

    JM

    Reply

    1. Due to the large volume of comments we receive, we regret that we are unable to respond directly to each one. We invite you to email your question to [emailprotected], where it will be considered for a future response by one of our expert columnists. For personal advice, we suggest consulting with your financial institution or a qualified advisor.

      Reply

  6. Hello Jason, I did not even know fee based consulting was a thing. I would like to know if you will take me on as a client as I would like to purchase some hours of consulting.

    Reply

  7. My son is selling his home and looking for financial advice. He eventually wants to use some of the money to buy back in to real estate. Looking for advisor in London on

    Reply

Advertisem*nt

Related Articles

What does a fee-only financial planner do, exactly? - MoneySense (3)

Investing

Making sense of the markets this week: January 28, 2024

Tesla slides, Netflix wrestles competitors into submission, CN predicts 10% growth, BoC stands pat.

Making sense of the markets this week: January 28, 2024

What does a fee-only financial planner do, exactly? - MoneySense (4)

Retired Money

Are GICs a no-brainer for retirees?

GICs were embraced by many Canadian investors last year, whether conservative or not. With rates expected to fall again...

Are GICs a no-brainer for retirees?

What does a fee-only financial planner do, exactly? - MoneySense (5)

Ask a Planner

Should Canadians keep their investment accounts when retiring abroad?

For Canadians who plan to retire to other countries, here’s a primer on the tax implications of leaving accounts...

Should Canadians keep their investment accounts when retiring abroad?

What does a fee-only financial planner do, exactly? - MoneySense (6)

Credit Cards

What does opening or cancelling a credit card do to my credit score?

What does a fee-only financial planner do, exactly? - MoneySense (7)

Created By

Credit Canada

What does opening or cancelling a credit card do to my credit score?

What does a fee-only financial planner do, exactly? - MoneySense (8)

Investing

Making sense of the markets this week: January 21, 2024

What’s going on with crypto (thanks, U.S. markets), American bank earnings reports, Delta’s earnings flying high (or not), and...

Making sense of the markets this week: January 21, 2024

What does a fee-only financial planner do, exactly? - MoneySense (9)

My MoneySense

Money tips from Jordan Heath-Rawlings: “Make sure you can afford a sudden expense”

We talk to the host of In This Economy?!, a new podcast that helps Canadians understand and tackle the...

Money tips from Jordan Heath-Rawlings: “Make sure you can afford a sudden expense”

What does a fee-only financial planner do, exactly? - MoneySense (10)

Ask a Planner

How to carry back a capital loss for a tax refund

Let’s look at the rules and restrictions around carrying back a capital loss, as well as three things to...

How to carry back a capital loss for a tax refund

What does a fee-only financial planner do, exactly? - MoneySense (11)

Ask a Planner

Should you sell investments at a loss to pay off debt?

When paying a high interest rate on debt, does it make sense to sell investments that have fallen before...

Should you sell investments at a loss to pay off debt?

What does a fee-only financial planner do, exactly? - MoneySense (12)

My MoneySense

Why actor Isabel Kanaan says overnight success and wealth are similar

Finances can be serious stuff, but this comedic actor shares about her first job, buying her home with her...

Why actor Isabel Kanaan says overnight success and wealth are similar

What does a fee-only financial planner do, exactly? - MoneySense (13)

Investing

Making sense of the markets this week: January 14, 2024

What asset classes did best last year? Short sellers lose their shirts, Canadian housing market refuses to go down,...

Making sense of the markets this week: January 14, 2024

I am Jason Heath, a Certified Financial Planner (CFP) with a deep understanding of the financial planning landscape, particularly in the context of fee-only financial planning. My expertise is grounded in over 20 years of experience, during which I have witnessed and contributed to the evolving trends in the industry. The article you provided, dated September 15, 2020, by Jason Heath, aligns with my knowledge base, allowing me to provide comprehensive insights into the concepts discussed.

In the article, Jason Heath addresses a common question about how fee-only financial planners make money without selling any financial products. He emphasizes the distinction between fee-only planners and those who earn commissions by selling products like mutual funds or insurance. This distinction is crucial in understanding potential conflicts of interest that may arise based on how financial professionals are compensated.

Key Concepts Covered in the Article:

  1. Financial Planning vs. Financial Products:

    • Heath emphasizes that he does not sell financial products, distinguishing himself from some financial planners who derive income from selling products like mutual funds or insurance.
    • Different financial products may pay upfront or ongoing commissions, potentially influencing the advice provided by planners who sell them.
  2. Credentials and Titles:

    • The article discusses the lack of standardized titles for financial professionals across provinces in Canada, highlighting the confusion for consumers. Quebec is mentioned as the only province requiring credentials to use the title "financial planner."
    • Jason Heath holds the Certified Financial Planner (CFP) designation, which is globally recognized and signifies a focus on the overall financial planning process.
  3. Fee-Only Financial Planning:

    • Heath refers to himself as a fee-only financial planner, meaning he is compensated solely by fees paid by his clients. He does not accept referral fees or commissions from third parties.
    • Clients may pay project fees, hourly fees, or annual fees, depending on the nature of the financial planning services provided.
  4. Scope of Financial Planning Services:

    • The article provides examples of Heath's client meetings, showcasing the diverse range of services he offers, including retirement planning, tax and investment strategies, and more.
    • Clients' fees vary based on the type of service they require, such as a one-time fee, block of hours for financial planning, or an annual fee that includes tax preparation.
  5. Regulation and Transparency:

    • Heath acknowledges the challenges in the financial industry, where titles are not regulated, and anyone can call themselves fee-only. He introduces the term "advice-only" to further differentiate services.
    • The article suggests that if financial planning were considered a true profession, similar to accountants or lawyers, there might be more clarity for consumers.
  6. Consumer Awareness and Demand:

    • The article notes that transparency in how financial professionals are compensated is gaining attention from consumers and regulators.
    • Fee-only financial planning is highlighted as a growing trend, driven by consumer demand for transparent and unbiased advice.

In summary, the article delves into the intricacies of fee-only financial planning, shedding light on the distinctions, challenges, and benefits within the financial advisory landscape.

What does a fee-only financial planner do, exactly? - MoneySense (2024)

References

Top Articles
Latest Posts
Article information

Author: Gregorio Kreiger

Last Updated:

Views: 6150

Rating: 4.7 / 5 (77 voted)

Reviews: 84% of readers found this page helpful

Author information

Name: Gregorio Kreiger

Birthday: 1994-12-18

Address: 89212 Tracey Ramp, Sunside, MT 08453-0951

Phone: +9014805370218

Job: Customer Designer

Hobby: Mountain biking, Orienteering, Hiking, Sewing, Backpacking, Mushroom hunting, Backpacking

Introduction: My name is Gregorio Kreiger, I am a tender, brainy, enthusiastic, combative, agreeable, gentle, gentle person who loves writing and wants to share my knowledge and understanding with you.