Why Fee Only?

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Some Financial Planners use the term “Fee” in describing their services, when in fact, they sell products and earn commissions.

“Fee” has become the new buzz word. Marketing efforts are being used to deceive you with terms such as “fee-based” or “fee-offset” and now even the once sacred term “fee-only.” These terms do not mean that these financial planners do not sell products and/or earn commissions!

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Fee-Based:

Fee-based planning is a very broad term that could mean a planner charges a fee during some point of your relationship. However, more importantly, fee-based planners also earn commissions. Although they may charge a fee for a consultation or for a financial plan, they are also compensated by commissions after they sell financial products to you.

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Fee-Offset:

Fee-offset planners usually charge a fee for a financial plan and then offset the fee with any commissions earned. In practice, the commissions are much higher than the fees and you do not receive a credit or a refund.

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Fee-Only Services

Prior to 1997, the Certified Financial Planner Board of Standard’s Code of Ethics clearly required that Certified Financial Planners only utilize the term fee-only if they truly offered fee-only planning. This indicates that they never receive commissions.

Greg came across a commissioned sales person who was also advertising fee-only services. Honor bound by the Code of Ethics, Greg reported this infraction to this Financial Planner and also to the Certified Financial Planner Board of Standards. Greg’s reporting of this apparent violation of the Certified Financial Planner Code of Ethics created a national debate regarding the use of the term fee-only. This came to be popularly known in the media as “The Galecki Decision.”

In response to this outcry, the Certified Finanacial Planner Board of Standards chose to change the Code of Ethics stating that a financial planner may advertise fee-only services even if they take commissions at other times.

The new Code of Ethics now states that anyone who advertises as being a fee-only financial planner must be fee-only at all times. Otherwise, a commissioned sales person may now advertise to offer fee-only services.

It is unfortunate that our very Code of Ethics allows manipulation and confusion of this term. This manipulation and purposeful confusion is at the expense of the consumer. If your advisor claims to offer fee only services, find out if they are fee only all of the time.

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Fee Only Financial Planning:

Consumers are coming to understand the advantages of using a Fee-Only Financial Planner.

Since Galecki Financial Management’s compensation is not based upon your decision to purchase a financial product, you do not have to be concerned with the objectivity of our recommendations.

All Galecki Financial Management employees are paid by salary. We are all Fee-Only Financial Planners – All The Time!