Fee-only advisors are paid only by their clients, through fees such as a percentage of assets under management, a flat fee, or an hourly rate. Fee-based advisors also charge client advisory fees, but they may additionally receive commissions or other compensation connected to the financial products they recommend. Because the two names sound almost identical, the most dependable way to tell which model an advisor uses is to read the compensation disclosures in their advisory firm’s Form ADV.

The similarity between the terms ‘fee-only’ and ‘fee-based’ could be a common source of confusion for investors. Both kinds of advisors may send you a statement showing an advisory fee, and both may describe their services in similar language. What that statement may not show is whether the financial advisor is receiving additional compensation through commissions on the products they recommend. Fee-only signifies that neither the firm, nor its advisors, receive commissions or additional revenue from product providers. Fee-based advisors, by contrast, may receive fees from you as well as commissions from selling products and/or revenue-sharing payments from product providers, which introduces monetary influence into how your portfolio is managed.

What Fee-Only Means

A fee-only advisor is compensated solely by the client. The National Association of Personal Financial Advisors (NAPFA) defines fee-only to mean that neither the advisor, nor any related party, receives compensation contingent on the purchase or sale of a financial product. Fee-only advisors do not accept commissions, rebates, finder’s fees, or payments from product companies as a result of implementing their recommendations.

What Fee-Based Means

A fee-based advisor charges clients a fee for advice or account management and may also earn commissions on products such as annuities, insurance policies, or certain mutual funds. Fee- based advisors are commonly registered both as investment adviser representatives and as registered representatives of a broker-dealer, which allows them to provide advisory services and to sell commissioned products. Some of their firms may also receive revenue sharing or other payments from product sponsors.

Fee-based compensation is legal and must be disclosed, and it is a different arrangement from fee-only compensation. If an advisor is permitted to receive payments from third-party product providers, clients must carefully consider which specific financial guidance generates this extra revenue and evaluate how those inherent conflicts of interest are addressed.

Fee-Only vs. Fee-Based at a Glance

	Fee-Only	Fee-Based
Who pays the advisor	Only the Client	The client, and possibly product companies
Commissions on Products	Not accepted	May be received
Revenue sharing or other third-party payments	Not accepted	May be received
Common fee structures	Percentage of assets, flat fee, hourly, retainer	Advisory fees plus commissions

How to Tell Whether an Advisor is Fee-Only or Fee-Based

Form ADV is the uniform registration form that investment advisors must file with the
SEC or state securities authorities, and it is a public record. Here is how to use it to identify an
advisor’s compensation model.

1. Search their firm by name or CRD number on the SEC’s Investment Advisor Public Disclosure (IAPD) website and open its Form ADV.
2. In Part 1A, go to item 5.E, which lists every way the firm is compensated for advisory services. Check whether “commissions” is checked.
3. Open the Part 2A brochure and read item 5 (Fees and Compensation). If their firm accepts compensation for selling securities or other investment products, this section must stipulate that.
4. Open Part 2A, Item 12 (Brokerage Practices) to see whether the firm receives any soft- dollar arrangements.
5. Compare their firm’s Form CRS, a short relationship summary that answers the same standard questions for every firm, including how its financial advisors make money.

For a closer look into the difference between Fee-only and Fee-based, watch our videos,
Fee Only vs. Fee Based and Commission Financial Advisors and Uncover the Truth About Your
Investment Advisor – Form ADV.

Zhang Financial— A Fee-Only Firm

Zhang Financial is a fee-only registered investment adviser, compensated solely by our clients. As disclosed in our Form ADV, we do not receive compensation from selling proprietary products, engaging in principal trading, third-party payments, revenue sharing, commissions, kickbacks, or soft dollars. Our Form ADV is publicly available here. Charles Zhang, Lynn Chen- Zhang, and Alex Zhang are members of NAPFA, which only admits fee-only advisors. Zhang Financial was also ranked #7 on Forbes’ 2025 Top RIA Firms, the highest-ranked Michigan- based RIA on the list.

Released 10/1/25 based on a 12-month period ending 3/31/25. Rankings developed by SHOOK Research. Zhang Financial paid no fee to be considered for or included in the ranking. The firm pays Forbes a licensing fee to use the ranking and logo. See zhangfinancial.com/disclosure for full ranking criteria and methodology.

Checklist: Fee-Only or Fee-Based

• Ask the advisor directly whether they or any related party receive commissions of any kind.
• Check Form ADV Part 1A, Item 5.E for commission compensation.
• Read their firm’s Form CRS section on how its financial professionals are paid.
• Search for the advisor in NAPFA’s Find an Advisor directory to see if they are NAPFA-registered.

Frequently Asked Questions

Is fee-based the same as fee-only?
No. A fee-only advisor is paid only by clients, while a fee-based advisor charges client fees and may also receive commissions or other compensation from product companies.

Is a fee-based advisor required to be a fiduciary?
Yes, an advisor’s firm is legally required to act as a fiduciary when managing advisory accounts. Under the SEC’s Regulation Best Interest, advisors operating in a broker-dealer role are mandated to serve the client’s best interest whenever offering product guidance.

How do fee-only advisors charge for their services?
Fee-only advisors may charge a percentage of assets under management, a flat or retainer fee, or an hourly rate. In every case, the fee is paid by the client.

Do fee-only advisors have any conflicts of interest?
Every compensation model carries some potential conflicts. For example, an advisor paid a percentage of assets has an incentive to keep assets under management. Fee-only advisors disclose these conflicts in their Form ADV, and the fee-only model removes conflicts tied to product commissions and third-party payments.

Where can I find out how an advisor is paid?
Their firm’s Form ADV and Form CRS, available free at adviserinfo.sec.gov, disclose how the firm is compensated.

At Zhang Financial, we believe informed clients are better positioned to evaluate their financial
options and the professionals who advise them. For additional educational content and financial
planning insights, visit zhangfinancial.com.