An advisor is fee-only if the only money they earn comes from you. You can check it yourself in about ten minutes using the firm’s Form ADV and the advisor’s registrations, both free on the SEC’s adviser search. Here’s the exact test Wellspent runs on every firm, and how to run it.
Why you can’t take the label at face value
“Fee-only” isn’t a protected title, and it’s easy to blur. Many advisors say “fee-based” or “fiduciary,” and some say fee-only while a related company earns commissions. The filings show how a firm is actually paid.
The four checks
Wellspent lists an advisor as fee-only only if all four of these hold.
| Check | Where to look | Fee-only answer |
|---|---|---|
| 1. The firm doesn’t earn commissions | Form ADV Part 1, Item 5E (compensation) | “Commissions” is not checked |
| 2. The advisor isn’t a registered broker | The advisor’s record on the SEC search, or FINRA BrokerCheck | No broker registration |
| 3. The firm doesn’t sell insurance on the side | Form ADV Part 1, Item 6A (other business) | “Insurance broker or agent” is not checked |
| 4. No related broker-dealer or insurance agency | Form ADV Part 1, Item 7A (related persons) | Broker-dealer and insurance company or agency are not checked |
A firm that passes all four can only be paid by its clients.
How to run the checks
1. Find the firm. Go to adviserinfo.sec.gov, choose “Firm,” and search the firm’s name. Open the firm summary.
2. Read the Form CRS first. It’s a short summary of fees and conflicts written for clients. Look for words like “commissions,” “12b-1 fees,” “revenue sharing” or “insurance.” A fee-only firm’s conflicts section is short.
3. Open Form ADV Part 1. From the firm page, open the full Form ADV.
- Item 5E lists every way the firm is paid: a percentage of assets, hourly, subscription, fixed fees, commissions, performance-based fees, or other. If “commissions” is checked, the firm isn’t fee-only.
- Item 6A lists other businesses the firm is in. If “insurance broker or agent” or “registered representative of a broker-dealer” is checked, the firm earns money beyond your fees.
- Item 7A lists related companies. A related broker-dealer or insurance agency can pay the firm’s people even when the advisory firm itself doesn’t.
4. Check the person. Search the advisor by name on the same site, or on FINRA BrokerCheck. If they show a current broker registration alongside their adviser registration, they’re dual registered and can earn commissions.
5. Read the brochure. Form ADV Part 2A, the firm’s brochure, explains fees in plain words, including whether the firm or its people receive anything from product companies.
What the words mean
- Fee-only: paid only by clients. No commissions, no product revenue.
- Fee-based: charges fees and can also earn commissions. Not fee-only.
- Commission-based: paid mainly when you buy a product.
- Fiduciary: a legal duty to act in your best interest. Registered investment advisers owe it, but it describes duty, not pay. A fiduciary can still be fee-based.
See the full comparison in fee-only vs fee-based vs commission.
Red flags
- A fee-only claim on the website, but commissions checked on Form ADV
- An advisor who is also a registered representative of a broker-dealer
- A firm that sells insurance or annuities through an affiliated agency
- Vague answers when you ask, “Do you or anyone at your firm earn anything from the products you recommend?”
- Mutual fund share classes with 12b-1 fees in your account
If your current advisor isn’t fee-only
That doesn’t mean they’ve done anything wrong, but it’s worth knowing what you’re paying for.
- Ask for a list of everything you pay in a year, in dollars: advisory fees, fund expenses, insurance and annuity costs, and any commissions.
- Ask which of your holdings pay the advisor or the firm, and how much.
- Look for surrender charges before you move anything. Some annuities and insurance policies charge you to leave in the first years.
- Get a second opinion from a fee-only advisor. An hourly review (the median is $300 an hour among firms that publish prices) is often enough.
What our check can’t see
The filings are reliable, but they’re a snapshot. A firm can change its business between filings, and the SEC search doesn’t show everything an individual earns. If something you read conflicts with what an advisor tells you, ask them directly, and ask them to put the answer in writing.
Every advisor in the Wellspent public graph has passed these checks against current SEC data, and we recheck them each month when the SEC publishes new filings. You can read how in our methodology.