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Finding a good financial advisor can be daunting. You’re being asked to entrust your entire financial future to this person. Get it right, and it can mean financial freedom for you and your family. Get it wrong, and it can set you back years.
The problem is that there are a lot of pretenders out there. And unfortunately, a lot of scammers, too. Plus, the financial industry loves jargon. We use it across investment products, services, and the professionals who offer them. Most of it is designed to make things sound more complicated than they are.
Take the acronyms alone. RIA (Registered Investment Advisor), CFP (Certified Financial Planner), CFA (Chartered Financial Analyst), CRPC (Chartered Retirement Planning Counselor), and plenty, plenty more (253, in fact, which most of are complete nonsense). You basically have to filter through alphabet soup before you can figure out who is worth talking to.
This post will help cut through that confusion. The first thing you should look for in an advisor: make sure they are a true fiduciary. Not a fiduciary in name only. If you’re already familiar with what a fiduciary is and want to skip ahead, here’s our guide to the top fee-only financial advisors in San Diego.
What is a Fiduciary Advisor?
A fiduciary financial advisor is legally required to act in your best interest. Under the Investment Advisers Act of 1940, fiduciaries owe their clients two core duties: 1. a duty of care and 2. a duty of loyalty. This means they must provide advice that serves your goals, seek the best execution of your transactions, and never put their own financial interests ahead of yours.
Most financial advisors do not operate this way. They are only required to make suitable recommendations, which means they can put their financial interests ahead of yours.
The biggest difference comes down to how they get paid. A fiduciary does not collect commissions on products sold. A non-fiduciary (like those under the suitability standard) can collect a commission on the mutual funds, life insurance, and annuities they recommend to you. There are exceptions, like dual-registered advisors, but this rule broadly applies.
We cover the specifics of fiduciaries versus non-fiduciaries in depth here. The bottom line: fiduciaries are held to a higher legal standard enforced by the SEC, a federal agency. Non-fiduciaries are regulated by FINRA, a private, self-governing organization. The difference matters.
Fee-Only or Fee-Based?
The easiest way to tell whether an advisor is a true fiduciary is to ask one question: Are they fee-only, fee-based, or both?
- Fee-only advisors are registered with the SEC and charge clients a specific fee for services rendered. They do not collect commissions or undisclosed compensation of any kind. They are legally required to act as fiduciaries.
- Fee-based advisors are registered with FINRA. They charge fees similar to fee-only advisors, like asset-based management (AUM) fees. But they also collect commissions on products they sell for product companies. Think mutual funds, life insurance, and annuities. Some products pay higher commissions than others. Fee-based advisors tend to recommend the ones with the highest payout.
- Both: Dual-Registered advisors are registered with both the SEC and FINRA. This means they can act as a fiduciary one minute and then turn around and sell you a commissioned product the next. This is not a good thing. Be on the lookout for these types of advisors.
How Fiduciary Advisors Get Paid
Fee-only fiduciaries use a few different payment structures. Which one they use depends on the clients they serve and what they offer. The most common structures include:
Assets Under Management (AUM)
This is the most common fee structure in the industry. AUM fees are based on a percentage of the capital your advisor manages. For example, a fiduciary charging 1% on $1,000,000 would cost $10,000 per year. Most firms bill quarterly, so you’d see 0.25% charged every three months.
Some fiduciaries scale their rate down as your portfolio grows. For example, 1.00% on the first $1,000,000 and 0.75% on everything above that.
At Bull Oak, our fee schedule includes an AUM fee of 0.00% on the first $1,000,000 under management and 0.35% on all amounts above that. We also charge a fixed annual fee, which I’ll cover below.
Do more with what you’ve earned.
You’ve worked hard to get here. We build financial plans around your actual life so you can make the most of it.
Hourly
Some fiduciaries bill by the hour. This can include financial plan creation, rebalancing, document preparation, meetings, and other planning work.
This sounds reasonable, but it can create an unintended problem: clients stop calling. They don’t want to run up a bill over what they think is a small question. But small questions in financial planning are rarely small. A missed tax deduction, a poorly structured entity, or a badly timed asset purchase can cost far more than an hour of advisory time.
Fixed Fee
Fixed fees, or retainer models, have been gaining popularity. At Bull Oak, we lead with a fixed annual fee and include an optional AUM fee for clients who want portfolio management. This makes sense for our clients because we are a planning-first firm. The pricing is straightforward, and there are no surprises.
The fixed fee model works well for clients who value transparency and predictable costs. It may not be the best fit for someone with a smaller portfolio or someone looking for minimal services. The right fee structure depends on your situation.
Project-Based Engagements or One-Time Fees
Some clients don’t need ongoing help. But even financially sophisticated people benefit from an objective second set of eyes on asset allocation, retirement account structure, or a major financial decision.
In these cases, an advisor charges a one-time fee for a specific engagement. For example, someone who has their savings plan dialed in through disciplined budgeting might still need help deciding whether to upgrade their house or how to structure the sale of a business.
If you enjoy managing your own finances and feel confident about your direction, a project-based engagement might be a good fit. Interview a few advisors before committing to make sure the person you hire can provide real value.
Which Fee Structure is Best?
There is no “best” payment structure when it comes to fiduciaries. The question is, ultThere is no “best” fee structure. The right one depends on your situation and the advisor’s service model. This is a professional relationship, and the fee should reflect the value being delivered.
That said, the difference between structures may not be as large as you’d think.
A series of studies from Schwab’s 2024 RIA Benchmarking Study shows that registered investment advisors average 44 hours per client per year, split between direct service (29 hours) and operations and admin support (15 hours). The average firm generates roughly $3,000,000 in revenue across 314 clients.
That works out to about $9,767 per client. Divide that by the 44 hours spent per client, and you get an effective hourly rate of just over $220. That is relatively in line with other professional service providers.
So whether you’re paying a flat fee, an AUM fee, or an hourly rate, the total cost often ends up in a similar range. The billing mechanism is different. The overall cost may not be.
Keep in mind that not all advisors are the same. Just like doctors, financial professionals have different skill levels and areas of expertise. Do your homework and interview your advisors before signing anything.
Is Morgan Stanley a Fiduciary? What About Fidelity or Edward Jones?
This is one of the most common questions we get, and the answer matters because it directly affects how you’re being advised.
Morgan Stanley advisors are brokers, not fiduciaries. They are registered with FINRA and held to the suitability standard, not the fiduciary standard. This means they can recommend investment products that earn them commissions, even if a lower-cost option would be better for you. The same is true of Edward Jones and most other traditional brokerage firms.
Fidelity and Charles Schwab are also brokerages, not fiduciary advisors. Their role is primarily custodial. They hold client assets but do not act as fiduciaries when providing advice. However, an independent fee-only fiduciary advisor (like Bull Oak) can use Fidelity or Schwab as a custodian for client assets while still operating under the fiduciary standard. The custodian holds the money. The advisor provides the advice. These are two separate roles.
Banks like Bank of America (Merrill Lynch) and Wells Fargo also operate as broker-dealers. Their advisors are compensated through commissions on product sales and are not held to the fiduciary standard.
The easiest way to verify whether any specific advisor is a fiduciary is to check their registration status on BrokerCheck. If they’re listed only as a Broker, they are not a fiduciary. If they’re listed as an Investment Adviser, they are. If they’re listed as both, they’re dual-registered and can switch between standards depending on the product.
For a deeper breakdown of how to evaluate whether an advisor is a true fiduciary, see our guide on what a fiduciary financial advisor is and why you need one.
Conclusion: Is a Fiduciary Advisor Worth It?
For most people, a fiduciary is the only type of advisor that makes sense. There are niche situations where a non-fiduciary product may come into play, but those are exceptions.
We live in a world full of self-proclaimed financial experts. Confidence is not the same as competence. Find a financial advisor whose interests are financially aligned with yours. That is the best way to avoid fraud, misaligned incentives, and ending up with financial products that have nothing to do with your actual goals.
If you want to know more about how a fee-only fiduciary financial advisor can help you take control of your financial future, see if we’re a good fit.
Learn more about our retirement planning, investment management, and tax planning services.
Do more with what you’ve earned.
You’ve worked hard to get here. We build financial plans around your actual life so you can make the most of it.
FAQ
Fiduciary advisor costs vary by fee structure. AUM fees typically range from 0.25% to 1.5% of assets under management per year, depending on the firm and the services included. Flat fees for planning engagements often range from $2,000 to $10,000 annually. Hourly rates generally run between $200 and $400 per hour. According to Schwab’s 2024 RIA Benchmarking Study, the average advisor spends around 44 hours per client per year, which puts the effective hourly rate for most fee structures in a similar range regardless of billing method.
No. Morgan Stanley advisors are brokers registered with FINRA, not fiduciaries. They are held to the suitability standard, which means they can recommend products that earn them commissions as long as those products are “suitable” for you. The same applies to Edward Jones, Bank of America (Merrill Lynch), and Wells Fargo. To work with a true fiduciary, look for a Registered Investment Advisor (RIA) that is fee-only.
Fidelity and Charles Schwab are brokerage firms, not fiduciary advisors. They primarily act as custodians, meaning they hold your assets but are not legally required to provide advice in your best interest. However, an independent fee-only fiduciary advisor can use Fidelity or Schwab as a custodian for client assets while still operating under the fiduciary standard. The custodian holds the money. The advisor provides the advice. These are two separate roles.
Fee-only advisors charge clients directly for services and collect no commissions or compensation from product companies. They are registered with the SEC and legally required to act as fiduciaries. Fee-based advisors charge similar fees but also collect commissions on products they sell, like mutual funds, life insurance, and annuities. Despite sounding nearly identical, these two models have fundamentally different incentive structures. Fee-only is the cleaner fiduciary relationship.
No. It’s the first filter, not the last. A fiduciary designation tells you the advisor is legally required to act in your best interest. But you still need to evaluate their experience, their approach to planning, and whether they’re a good fit for your situation. For more on what to look for, download our guide to the best questions to ask a financial advisor here.
A fiduciary designation is not a guarantee of character. But it does mean the advisor is legally obligated to act in your best interest and can face serious consequences for violating that obligation. That alone significantly reduces the odds of fraud or misaligned incentives.
For most people, yes. There are niche financial products, like whole life insurance and annuities, that are only sold by non-fiduciary advisors. But a fiduciary can still recommend these products without selling them to you directly. For the vast majority of planning and investment needs, a fiduciary advisor is the right choice.
No. “Fiduciary” is a legal designation. It means the advisor is required to follow strict rules when working with clients, and they can be held accountable if they don’t. It is not a title an advisor gives themselves. It is a standard they are held to.
