# Fee-only or fee-based: how each kind of advisor is paid, and why the label matters URL: https://www.financialadvsr.com/guides/fee-only-vs-fee-based Updated: 2026-10-10 Publisher: Financial ADVSR (https://www.financialadvsr.com) A fee-only financial advisor is paid only by clients, through asset-based, hourly, flat or retainer fees, and neither the advisor nor the firm takes commissions or other pay tied to selling products. A fee-based advisor also charges fees but can earn commissions too, typically on insurance, annuities or brokerage trades, usually because the advisor is licensed with a broker-dealer as well as an investment adviser. Neither term is defined in federal securities law, but the CFP Board restricts who may use 'fee-only' and treats 'fee-based' as meaning fees and commissions. Key points: - Fee-only means the client is the sole source of compensation: no commissions, 12b-1 fees, revenue sharing or referral fees to the advisor or the firm. - Fee-based is not a regulatory category; the CFP Board treats it as equivalent to 'fee and commission' and requires anyone using it to make clear they are not fee-only. - Under CFP Board standards in effect since Oct. 1, 2019 and enforced since June 30, 2020, 'sales-related compensation' includes commissions, trails, 12b-1 fees, spreads, transaction fees, revenue sharing and referral fees. - NAPFA's fiduciary standard, reported by InvestmentNews in June 2026, bars its registered advisors from commissions, revenue sharing and referral fees and requires the CFP certification. - On Form ADV, SEC-registered advisers report how they are paid, from a percentage of assets and hourly charges to commissions and performance fees. - Form CRS requires firms to describe their fees and how their financial professionals are paid, which is the quickest way to see whether an advisor can earn commissions. ## What does fee-only mean? A fee-only advisor is compensated solely by the client. Common fee structures include a percentage of assets under management, an hourly rate, a flat fee for a financial plan, or an annual or monthly retainer. What fee-only rules out is any payment tied to the purchase or sale of a product, whether it comes from a fund company, an insurer or a broker-dealer. The term has no definition in the Investment Advisers Act or SEC rules. Its meaning comes mostly from the CFP Board, which governs the use of the term by CFP professionals, and from NAPFA, the National Association of Personal Financial Advisors, whose members are fee-only advisors. This guide is general information, not legal or financial advice. ## What does fee-based mean? Fee-based usually describes an advisor who charges fees for advice and can also earn commissions. A typical fee-based advisor is dually registered: an investment adviser representative of an RIA, which charges an advisory fee, and a registered representative of a broker-dealer, which pays commissions on products such as annuities, insurance or brokerage trades. Many hybrid RIA and independent broker-dealer advisors work this way. Because 'fee-based' sounds close to 'fee-only,' the CFP Board treats it with caution. Its guidance treats fee-based as equivalent to 'fee and commission,' and a CFP professional who uses fee-based or any other label short of fee-only must avoid suggesting fee-only status and must clearly say either that they earn fees and commissions or that they are not fee-only, according to the CFP Board's guidance and Financial Planning's coverage of the 2019 standards. ## How does the CFP Board define fee-only? Under the CFP Board's Code of Ethics and Standards of Conduct, a CFP professional may describe their or their firm's compensation as fee-only only if neither the professional nor the firm receives sales-related compensation, and no related party receives sales-related compensation in connection with professional services the CFP professional or firm provides to clients. The standards took effect Oct. 1, 2019, and the CFP Board began enforcing them on June 30, 2020. Sales-related compensation is broader than commissions. The CFP Board replaced the word 'commissions' with sales-related compensation because some fees, such as 12b-1 fees, create the same incentive to buy or sell. The standards list commissions, trailing commissions, 12b-1 fees, spreads, transaction fees, revenue sharing, and referral or solicitor fees as examples. Excluded are soft dollars that fall within the Securities Exchange Act's Section 28(e) safe harbor and reasonable and customary custodial or administrative fees that are not based on the amount or value of client transactions. Related parties matter. The CFP Board presumes that family members and certain business entities are related parties. A planner whose spouse owns an insurance agency that sells to the planner's clients, for example, generally could not call themselves fee-only. ## Have advisors been disciplined over the fee-only label? Yes. In 2012 the CFP Board found that two Florida planners, the Camardas, had misrepresented their compensation by calling their firm fee-only while they also owned a commission-based insurance agency, and it issued a public letter of admonition, according to InvestmentNews. The Camardas sued the CFP Board; U.S. District Judge Richard Leon dismissed the case in July 2015, and a federal appeals court later upheld the dismissal, InvestmentNews reported. Compensation labels have reached the CFP Board's own leadership. In November 2012 the board announced that its chair, Alan Goldfarb, had resigned after a special committee found enough merit in allegations that he had violated the board's standards to refer them for further proceedings. Goldfarb told InvestmentNews he believed it was a misunderstanding over describing his compensation as salary rather than 'fee and commission,' since he was also a principal of a broker-dealer focused on mergers and acquisitions. ## How does NAPFA define fee-only? NAPFA defines a fee-only advisor as one compensated solely by the client, with neither the advisor nor any related party receiving compensation that depends on the purchase or sale of a financial product. NAPFA has since adopted a fiduciary standard for its NAPFA-Registered Financial Advisors, built on duties of care, loyalty, compensation, competence and engagement, InvestmentNews reported on June 22, 2026. Under it, advisors may not accept commissions on any financial product, enter revenue-sharing arrangements or accept referral fees, must disclose all fees in writing before an engagement begins, must hold the CFP certification and must complete 60 hours of continuing education every two years. ## Does the SEC regulate the terms fee-only and fee-based? Not by name, but it regulates how firms describe their pay. On Form ADV Part 1A, Item 5.E, an SEC-registered adviser checks every way it is compensated for advisory services: a percentage of assets under management, hourly charges, subscription fees, fixed fees, commissions, performance-based fees or other. Investors can look up any adviser's Form ADV on the SEC's Investment Adviser Public Disclosure site. Form CRS, the two- to four-page relationship summary SEC-registered advisers and broker-dealers must give retail investors, requires a section headed 'How do your financial professionals make money?' that explains whether they are paid based on factors such as assets serviced, the product sold or commissions. A firm whose advisors can earn commissions has to say so there. The line between fee-based brokerage and advisory accounts has also been litigated. In Financial Planning Association v. SEC, decided March 30, 2007, the U.S. Court of Appeals for the D.C. Circuit vacated an SEC rule that had exempted broker-dealers offering fee-based brokerage accounts from the Advisers Act, holding that the SEC had exceeded its authority. The ruling took effect Oct. 1, 2007, bringing those accounts under the Advisers Act, and the SEC adopted temporary relief, including a rule on principal trades for advisers that are also broker-dealers, to ease the transition. ## Is fee-only always cheaper or better? Not necessarily. Fee-only removes product-sales incentives, but every fee structure carries some conflict. The SEC's Form CRS instructions give the example that an adviser charging an asset-based fee has an incentive to encourage clients to add assets to the account, while a broker-dealer earning transaction fees has an incentive to encourage more trading. What a client pays depends on the fee level, the services provided and the underlying investments, not the label. Investors comparing advisors can ask the Form CRS conversation-starter question, 'If I give you $10,000 to invest, how much will go to fees and costs, and how much will be invested for me?', and check the adviser's Form ADV Part 2A brochure for the fee schedule. ## Questions **What is the difference between fee-only and fee-based?** Fee-only advisors are paid only by clients and take no commissions or other sales-related pay. Fee-based advisors charge fees but can also earn commissions, often through a broker-dealer affiliation. **Can a fee-based advisor be a fiduciary?** Yes, when acting as an investment adviser. When the same person sells a product as a broker-dealer representative, Regulation Best Interest applies to that recommendation instead of the Advisers Act fiduciary duty. CFP professionals owe a fiduciary duty whenever they give financial advice under CFP Board standards. **Do 12b-1 fees disqualify an advisor from being fee-only?** Under CFP Board standards, yes. 12b-1 fees are listed as sales-related compensation, and receiving them rules out the fee-only label. **Is fee-based the same as commission-based?** No. A commission-based advisor is paid mainly through product sales. Fee-based means a mix of fees and commissions, which the CFP Board treats as equivalent to 'fee and commission.' **How can I tell if my advisor is fee-only?** Read the firm's Form CRS section on how its financial professionals make money and Item 5.E of its Form ADV Part 1A, and ask directly whether the advisor, the firm or any related party earns commissions. **When did the CFP Board's fee-only rules take effect?** The current Code of Ethics and Standards of Conduct took effect Oct. 1, 2019, and the CFP Board began enforcing it on June 30, 2020. Sources: - CFP Board: Code of Ethics and Standards of Conduct (https://www.cfp.net/ethics/code-of-ethics-and-standards-of-conduct) - CFP Board: CFP Board's Code of Ethics and Standards of Conduct: Guidance for Fee-Only Advisors (https://www.cfp.net/-/media/files/cfp-board/standards-and-ethics/compliance-resources/cfp-board-guidance-for-fee-only-advisors.pdf) - CFP Board: Frequently Asked Questions about Duties Owed to Clients (https://www.cfp.net/ethics/compliance-resources/2020/09/duties-owed-to-clients) - CFP Board: CFP Board Now Enforcing Its Strengthened Code of Ethics and Standards of Conduct (https://www.cfp.net/news/2020/06/cfp-board-now-enforcing-its-strengthened-code-of-ethics-and-standards-of-conduct) - Financial Planning: When can CFPs call themselves 'fee only'? (https://www.financial-planning.com/news/cfp-boards-new-fee-only-compensation-standard-for-financial-advisors) - CFP Board: CFP Board's Board of Directors Announces Resignation of Its Chair, Alan Goldfarb, CFP (https://www.cfp.net/news/2012/11/cfp-boards-board-of-directors-announces-resignation-of-its-chair-alan-goldfarb-cfp) - InvestmentNews: CFP Board chairman resigns amid ethics probe (https://www.investmentnews.com/rias/cfp-board-chairman-resigns-amid-ethics-probe/47866) - InvestmentNews: Judge throws out Camarda case against CFP Board (https://www.investmentnews.com/judge-throws-out-camarda-case-against-cfp-board-63207) - InvestmentNews: Appeals court upholds dismissal of Camarda fee-only case against CFP Board (https://www.investmentnews.com/?p=69382) - Financial Planning: Big CFP Board Win: Judge Throws Out Fee-Only Case (https://www.financial-planning.com/news/big-cfp-board-win-judge-throws-out-fee-only-case) - InvestmentNews: NAPFA raises the bar on fee-only fiduciary advice (https://www.investmentnews.com/practice-management/napfa-raises-the-bar-on-fee-only-fiduciary-advice/267103) - NAPFA: NAPFA Fiduciary Standard (https://www.napfa.org/napfa-fiduciary) - SEC: Form ADV Part 1A (https://www.sec.gov/about/forms/formadv-part1a.pdf) - SEC: Form CRS instructions (https://www.sec.gov/about/forms/formcrs.pdf) - WilmerHale: Court Overturns Fee-Based Brokerage Rule (https://www.wilmerhale.com/en/insights/publications/court-overturns-fee-based-brokerage-rule-april-6-2007) - SEC: Temporary Rule Regarding Principal Trades With Certain Advisory Clients (Release IA-2653) (https://www.sec.gov/files/rules/final/2007/ia-2653fr.pdf)