Fee-only advisors versus commission-based advisors comes down to who pays them, and Annex Wealth Management lays out that difference here for doctors and dentists. One is paid by you; the other is often paid by the company whose product you buy.
Neither model is a villain. But if you started saving late, carry student loans and have a practice to fund, the way your advisor is paid shapes which products show up in your plan.
What does fee-only actually mean?
A fee-only advisor is paid solely by the client, through a flat fee, an hourly rate or a percentage of assets, and accepts no commissions or kickbacks from products. That's the whole definition. Anything else, including "fee-based," allows commission income somewhere.
A commission-based advisor earns money when you buy an insurance policy, annuity or fund with a sales charge. Many advisors are hybrids and do both, which is why the label alone tells you little.
Compare how each advisor is paid and held to account
The rows that matter most for you are conflict of interest and cost visibility. A percentage fee shows up as a line on a statement, while a commission often sits inside the product and never appears as a bill.
| Fee-only advisor | Commission-based advisor | |
|---|---|---|
| How they are paid | Directly by you | By product companies |
| Typical charges | Flat, hourly or % of assets | Loads, sales charges, ongoing product costs |
| Conflict of interest | Fee grows with assets managed | Pay differs by product sold |
| Legal standard | Fiduciary duty (registered advisers) | Best-interest rule for brokers |
| Cost visibility | Listed in the agreement | Often inside the product |
Does a 5% load on $500,000 cost more than a 1% fee?
Take a hypothetical dentist, age 45, with $500,000 to invest. A 1% annual fee costs $5,000 each year. A 5% front-end load costs $25,000 on day one, before any ongoing fund costs.
Over five years the fee adds up to $25,000, the same as the load, ignoring growth. After that the fee costs more each year, so a buy-and-hold investor can come out ahead on commission. A client who needs ongoing advice, or who sells early, usually doesn't. Investments can lose value either way, and cost is the one piece you control.
Ask for Form CRS and the fee schedule
Any advisor can say "I'm on your side." The paperwork is harder to bend. Ask for these items before you sign anything, from us or anyone else:
- Form CRS (the relationship summary)
- Every source of compensation, in writing
- Surrender charges on any product
- Total cost over ten years
Where Annex Wealth Management starts: your monthly spending plan
Annex Wealth Management begins with what you spend each month, including loan payments and practice costs, and then asks what portfolio would fund that. Products come last. That's why our services, such as financial planning for doctors, physician student loan planning and cash balance plans for physicians, are described to you with their costs set out in a written agreement before work starts.
To decide between models, pick the one whose pay you can read and explain back. If you can't say how your advisor earns money on a given recommendation, you haven't been told enough.
Annex Wealth Management: common questions
Is a fee-based advisor the same as a fee-only advisor?
Is a commission-based advisor always more expensive for a physician?
What should a dentist ask before hiring either type of advisor?
This material is general information only and does not constitute investment, tax or legal advice tailored to your circumstances. Investing involves risk, including possible loss of principal. Before acting on any information here, speak with a financial advisor, tax professional or attorney about your specific situation.