'Fee-Only' and 'Fiduciary': Why You Must Know the Difference

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If you're looking for a financial adviser today, you've probably seen the word "fiduciary" everywhere.

Banks use it. Brokerage firms use it. Insurance companies use it. Independent advisers use it, too.

On the surface, that might sound like good news for investors, until you realize that the word is now being applied to vastly different business models, compensation structures and client relationships.

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That's why investors need to understand an important truth:

Fiduciary does not mean fee-only, and fee-only does not automatically mean fiduciary.

The distinction matters more than ever.

Fee-only: A clear, verifiable starting point

Fee-only refers to how a financial adviser is paid, and that clarity is exactly why it matters.

A fee-only financial adviser is compensated only by the client, through fees such as hourly charges, flat fees, retainer fees, or a percentage of assets under management. With a fee-only financial adviser there are no commissions, no sales incentives, and no third-party compensation from financial product providers.

From an investor's perspective, fee-only adviser compensation has four critical advantages:

It is binary. An adviser either accepts third-party compensation or does not
It is objective. No intent or interpretation required
It is verifiable. Disclosed in regulatory filings
It is enforceable. Capable of being required and monitored

In an industry full of marketing language and overlapping titles, fee-only remains one of the few bright-line standards investors can evaluate before hiring an adviser.

That clarity is why organizations such as the National Association of Personal Financial Advisors (NAPFA) were originally created — to give consumers a meaningful alternative to conflicted advice models.

About Adviser Intel

The author of this article is a participant in Kiplinger's Adviser Intel program, a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.

Fiduciary duty: Essential, but broad and inconsistent

A fiduciary relationship is something different.

Fiduciary duty governs how an adviser must behave, not how they are paid. It includes:

A moral obligation based on trust and client reliance
An ethical obligation rooted in professionalism and integrity
A legal obligation enforceable under common law, trust law, the Employee Retirement Income Security Act (ERISA), investment adviser regulations and securities regulations

These duties are critically important. But they are also complex, contextual and often invisible to consumers upfront.

Today, the word fiduciary is used to describe everything from comprehensive financial planning relationships to narrow, account-specific arrangements at banks, brokerage firms and insurance companies.

Many of these so-called fiduciary accounts apply only to a single product or transaction — and only some of the time.

That inconsistency is where investor confusion begins.

Why fee-only and fiduciary are not the same

Fee-only compensation does not create a fiduciary relationship by itself.

What it does do is:

Reduce structural conflicts of interest
Align adviser incentives with client outcomes
Make fiduciary behavior easier to deliver — and easier to defend

In other words, fee-only compensation supports fiduciary conduct, but it does not define it.

Steven Fox, founder of AdviceOnly and Next Gen Financial Planning, captures this distinction clearly: "If the consumer focuses on seeking comprehensive fee-only financial planning advice, then a fiduciary relationship with your financial advisor comes along for the ride in a tangible manner.

"The inverse is not necessarily true, particularly with so many different versions of the term 'fiduciary' now being marketed by the banks, brokerage firms and insurance companies.

"These account-specific marketing pitches don't really mean the same thing as the fiduciary standard of the comprehensive fee-only financial planner who promises to act in your best interest at all times with all of your accounts."

That insight is critical. Fee-only financial planning is comprehensive by design. Many fiduciary financial adviser marketing claims in the marketplace are not.

The risk of blurring the line

When fee-only and fiduciary are treated as interchangeable, several problems emerge:

Investors lose a clear way to compare advisers
Bright-line standards become semantic debates
Marketing claims replace structural transparency
Enforcement becomes harder and weaker

The word fiduciary is now so elastic that it often tells consumers very little about the conflicts they may still face. Fee-only, by contrast, remains concrete.

That doesn't make fiduciary duty unimportant. It makes it insufficient on its own as a consumer protection tool.

What investors should focus on

If you're trying to choose a financial adviser, think of it this way:

Fee-only answers the question, How is my adviser paid?
Fiduciary answers the question, How must my adviser act?

You want both — but you want them in the right order.

Fee-only compensation gives you a clear, objective foundation. A comprehensive fiduciary relationship is what should be built on top of that foundation.

The bottom line

The financial advice industry doesn't suffer from a lack of promises. It suffers from a lack of clarity.

Fee-only compensation remains one of the few distinctions that investors can verify in advance. Fiduciary duty is deeper, broader and essential, but it works best when supported by the fee-only financial adviser compensation model designed to minimize conflicts of interest from the start.

Fiduciary does not mean fee-only. But fee-only makes fiduciary advice far more likely.

For investors, that distinction isn't academic. It's protection.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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David Bromelkamp is an investor advocate and the founder of AdvisorSmart®, which was established in 2018 to provide investors with the education they need to access better financial advice. Sometimes referred to as the "Jerry Maguire of Financial Advice," he is passionate about objective financial advice and is leading the charge to educate investors about the best approach to finding and retaining objective, fee-only fiduciary financial advisors. His first book, AdvisorSmart for the Individual Investor: Your Guide to Selecting a Financial Advisor to Get Better Financial Advice, was released in April 2025 to arm consumers with the knowledge they need to succeed.