Not All Financial Advisors Are the Same — Here’s What You Need to Know

If you’re working with a financial advisor — or thinking about hiring one — this episode is for you.

In this conversation, I sit down with Kelly Palmer, CFA, CFP®, Founder of The Wealthy Parent, to break down the often confusing world of financial advisors: how they charge, what services they provide, and how to evaluate whether you’re truly getting value for what you’re paying.

We unpack the difference between fee-only and fee-based advisors, what it really means to be a fiduciary, and why those distinctions matter more than most people realize. But we also go deeper: you can’t compare advisors by fee alone without understanding what’s included. Investment management only? Financial planning only? Or comprehensive planning plus portfolio management? The scope of services makes a big difference.

We also cover:

• How to research advisors using the SEC and FINRA websites
• Key questions to ask about fees, services, and conflicts of interest
• Why personality fit may matter just as much as credentials

Whether you’re interviewing advisors for the first time or already have one and aren’t sure how you’re paying — or what else is out there — this episode will help you become a more informed, empowered consumer of financial advice.

Because clarity isn’t just for your portfolio. It’s for the people managing it.

Transcript

SPEAKER_01 0:00

Today's episode, we're going to be talking about the different types of financial advisors that are out there in terms of different services that are offered by people who call themselves financial advisors, as well as something else that's very important, which is the way in which different types of financial advisors charge their clients. And I'm very excited to have a guest with us today, Kelly Palmer, CFA CFP and founder of The Wealthy Parent. So welcome, Kelly. Please tell everyone a little bit about your background and your firm.

SPEAKER_00 0:42

Thank you, Carla, so much for having me here and the warm welcome. I'm looking forward to it. And so I'm a Chicago-based planner here, right in the city. I've been in the industry for 15 years now. I started a small fee-only firm in Chicago. We'll talk about these terms later. And then also decided after my time there to take a little career pause in 21, have my baby in 2022, and launch my firm in 2023. So now I'm an advice-only, fee-only financial planner. Again, we'll talk about all the jargon, but I primarily work with millennial parents and really enjoy what I do and happy to be here and talk about all these sort of jargon, misunderstandings, weird terms, all those things, how you pay fees, how much, how little. So looking forward to chatting today.

SPEAKER_01 1:39

Great. And I thought Kelly would be a great guest for us, a, because she's just wonderful, but also because Kelly and I operate our firms very differently. I manage assets as well as giving comprehensive financial planning advice. And Kelly, I believe you advise on investments, but you don't actually manage investments. Now, I think that we actually have a lot more in common than what we don't. So we are both fee-only advisors. We are independent, we are fiduciaries, all of the things that I think are very important in having an advisor. So, Kelly, if you could please help us out by explaining and defining all those terms that we've already been throwing around here.

SPEAKER_00 2:31

Yep, yep, perfect. So let's talk first, because I think the most important, well, maybe not most important, one of the important terms you threw out there was fee only. And when we think of sort of financial advice, there's fee only and there's fee-based. And those are very close terms, and I feel like they're very often swapped and confused, even among like, you know, families I work with. So I want to talk about those for a second. Then we'll touch on fiduciary as well and independent. But first, thinking about fee only, fee-based, like the the most simple way to think about it is fee only only gets paid by the client. So not through any products, not through any commissions. Only the client is paying a fee to the advisor. A fee-based advisor, they can also receive fees from the clients, but they could also get fees from selling products. They can also earn fees from certain investments that they might be recommending. So fee-based, like, yes, their fee is based on what you're paying them, but there's also many other things that they can earn their fee on. Now, like I also want to be clear, I might be a little biased towards fee only, but I'm also going to try and present, like, there are, of course, spaces where either can make sense. And I thought of this example too, that I think also it helps put it into perspective. So, fee-based and fee only, like if we think of a smoothie shop, I want to walk through this quick example. So let's say you walk into a smoothie shop, and the smoothie shop is a fee-only smoothie shop. So they're gonna charge you a fee for your smoothie, and for a smaller smoothie, they might charge a smaller price. For a larger smoothie, they might charge a higher price. But it's pretty straightforward. You're gonna pay for it, great. If we think about a fee-based smoothie shop, you might show up. You might still pay some kind of fee for the size of your smoothie. But then they also might say, like, oof, you're looking, you know, a little tired these days, Kelly. I know you've been exercising. Like, let's put some protein in that smoothie for you. So we'll do that. It makes sense, it's suitable, but there'll be a little bit higher charge because now I've added some protein in the smoothie. They might also say, Oh, some collagen would really help your like elder millennial skin there, so let's throw that in. Might start peppering in some other things that again might make sense, great, but will be more expensive. Then when I go to check out from the smoothie shop, they might say, you know what? What if you walk out of this smoothie shop and you get hit by a truck? How is your family gonna buy smoothies in the future? I'm like, oh my gosh, I don't know. And they'll be like, Well, we have this great product called smoothie protection, where you could pay a fee. And then if you get hit by that truck, your family will be covered and can buy smoothies for life. And I'm like, oh, that sounds great. So all of a sudden I buy smoothie protection. So I walked in to buy my smoothie. I walked out with a whole bunch of stuff I may or may not actually need, but the smoothie barista, maybe is the right word. Like they earned a pretty nice fee from all those different sales they made. So hopefully that kind of brings into perspective the only first fee-based. But two important terms there. Then fiduciary is the other big one that sounds like a weird legal term, which it kind of is. So fiduciary means legally, I have to put my client's best interest first. So that means when I'm making recommendations, if something is better for more my personal compensation, I can't make a recommendation just because of that. I have to say, no, what is truly in the best client's interest or what's the best thing for the client, what is in their best interest, and make the recommendation in that way and make sure I can justify that to a regulator. So fee only fiduciary means I'm gonna have to make recommendations in your best interest, and the only fee you're gonna pay me is the one that comes from you.

SPEAKER_01 6:41

Great. Yeah, I love that. Really helpful explaining all of that. And I think it's important too. I feel the advice that I give to my clients, that is the same advice that I use for myself, that I give to my own mom who is also a client. There's no hidden motivations. I have no reason to tell someone that they need more life insurance than they actually do. I don't sell life insurance. I'm just trying to give them the best advice I can. And I know that's how you operate as well. So how do you know how your advisor charges? Whether you currently have an advisor or you're looking for an advisor, how can you be sure that you're looking for the right type of advisor or understanding how your current advisor charges?

SPEAKER_00 7:34

Yeah, there's a couple of different ways, some easier than others to sort of figure out how much you're actually paying. Like a place to start might always be to look at your most recent statement or even the last, you know, three to four months of statements. Because then you might see some kind of fee that's coming out, whether it's monthly or quarterly. You're starting to see that. Then you might also see some transactions that occurred. And maybe when you look at the transaction on the statement, you might be purchasing a mutual fund for some amount of money. But then you also might see in there, well, I bought, you know, $1,000 of this mutual fund, but the total transaction was $1,250. So hmm, there must be something else that's going on there. That's probably a fee that's being charged based on the transaction. So that's kind of place one, I would start. Other places to look. So if you're really feeling a little more technical or like reading a lot, you could check out the advisors form ADV or their form CRS. So these are regulatory filings that advisors have to make. You can go to advisorinfo.sec.gov and get that sort of document. You can search for your advisor by name or their firm and start to see that form CRS if they're SEC registered. That will show pretty clearly kind of what types of fees they charge. You might have to do a little more digging if you're looking at the form ADB. But again, another spot that you can kind of go to to do your research. Beyond that, don't forget it's also an option to ask your advisor. Like they will, they must share with you how they earn their fee. And don't ever be afraid if they're making a recommendation, to also ask, depending which option I choose here, does that affect your compensation? And they have to tell you, like, yes or no, here's how it might affect that. So that can be a little more confrontational about absolutely like go for it. You should know and understand how your advisor is being paid.

SPEAKER_01 9:40

Yeah, I also sometimes encourage whether it's prospective clients that I'm talking with that are thinking of switching advisors or just people in my own network to ask the advisor how they're paying and also all the different ways that they're paying, because there are fees that Kelly you're my clients pay that don't go to either of us, right? So every ETF and mutual fund, aside from Fidelity, has a couple zero cost funds, but just about every fund out there has some sort of underlying fee that you can either look up on Morningstar.com or ask your advisor, just getting a good feel of all the different ways that you are paying for your financial advice and your investments and getting a clear answer as to what goes to your advisor and what doesn't. That is something that I'm always very transparent with with my clients and Kelly. I assume you are too, because I know you quite well. And looking at the mutual fund fees, making sure my clients are paying low fees. And I've had people come back to me and say, you know, when I started asking my advisor these questions, they gave a really complicated answer. They got a little squirmish. And to me, that is a huge red flag, right, Kelly?

SPEAKER_00 11:03

Yep, exactly. Like as soon as they're looking uncomfortable about that question, it's something's going on that might not be totally in your best interest to use some of our words there. Like, especially I see that if someone thinks like, oh, I'm not paying any fees to my investment advisor. Oh, but you are. They're probably much bigger than you think.

SPEAKER_01 11:25

Yeah. One thing, Kelly, could you please explain load funds? Because I see those a lot and people have no idea. You alluded to it a little bit before, but I'd love a deeper description, please. Yeah.

SPEAKER_00 11:37

Yeah. So there's definitely there's think about kind of front end load, back end load. There's all kinds of variations of load funds, but those really you're paying a big chunk up front, and then maybe less fees as time goes on. But think about some of those initial ones could be. I mean, I've seen one that's 5% that you're putting in, you're paying that fee up front to purchase this mutual fund investment. If you sold it a year from then, like Sayonara to that 5%, right? You've paid that. If you hold on to it for you know 50 years, like, okay, maybe that in the longer term helped you out, avoiding some other kind of fee. Like there's some, you know, reasoning there that might end up making sense. But big picture, you're paying a big fee up front, that a good chunk of that is gonna go to the advisor to pay their fee. So that goes back to our fee-based advisor who would sell you that kind of fund. You're paying that fee. They're saying thank you. Now you're in that sort of high fee investment that you might feel more stuck in because you paid this big fee up front. Then there's other investments where on the back side of things. When you go to sell, there's the back end load where you're paying another hefty fee on the way out. So definitely something to keep an eye on.

SPEAKER_01 13:01

Yeah. And I think it's really important. Obviously, I believe all advisors deserve to get paid. But when you have a type of advisor who's getting paid by load funds, there is that inherent conflict of interest of when they say, hey, actually, now I'm thinking, let's sell out of this fund and invest in this other fund instead. Is that because they really think it's best for you? Or because they made that one time, say 5% fee, and now they want to make another 5% versus like Kelly and I, our clients pay based on a quarterly or annual basis, regardless of whether we're switching the investments or not. So let's focus in a little bit more on the fee-only advisors. And Kelly, can you talk a little bit about the different ways that fee-only advisors get paid?

SPEAKER_00 13:57

There's quite a few. So I think the the classic one that people usually think of is charging a percentage of assets. So that might be you open an account for say $100,000, they charge a 1% fee. That's usually a thousand-ish dollars a year. As your account value goes up, that goes up. As it goes down, that goes down. Very clear what you're paying, right? So that's one. Call that percent of assets under management. AUM would be the shorthand term for that. So percentage of your assets. That's one option. Another option you might see is hourly advisors. So that's where you say, I have this question. I would like an answer. Depending on what the question is and what the answer is, that might take one hour, that might take 20 hours. And depending, you know, how experienced the advisor is, what kind of fees they charge, they're gonna charge an hourly rate for the answer to that question. So again, a fee that you're paying for advice based on hours done. Other advisors might charge based on a project. So for example, I do six-month projects in my firm. So I charge a flat fee for that six-month project where the hours spent might be higher on some, lower on others, but we're spending those six months together going through sort of the financial plan. For that, I charge a flat fee. So think of that as a project-based fee. Whether mine is six months, someone else might be eight weeks. There's all kinds of variations on there, but think about a flat project-based fee. So we have hourly assets under management, project base. The other one you might run into is a flat fee for managing assets. So where I talked about charging a percentage of assets on that $100,000 account. Some advisors instead charge a flat fee that no matter how much they're managing, the fee is gonna stay the same. Whether your assets go up or down, they'll still charge that one amount. So those are the big ones I could think of right now. I'm sure there's more. There's all kinds of variations in between all those as well.

SPEAKER_01 16:12

One thing I was gonna add that I don't know how common it is, but I know that some advisors will charge a say percentage of assets under management for ongoing investment management. And then they'll charge an additional maybe flat dollar fee to do financial plan, sort of a project fee in addition to assets under management. So, regardless of what type of advisor you're working with, I think it's really important to understand how they charge because transparency is really key. And I think also making sure that you feel you're getting your money's worth for what you pay. So I think one great example is at Amateurine Wealth, we charge a percentage of assets under management. And the fee starts at 1% of assets under management and goes down the more money that people have under management. And an important distinction that I see a lot. So 1% is sort of the average starting fee that I'd say. Some advisors charge more, some charge less. And amateur wealth, that 1% that you're paying includes asset management, comprehensive financial planning, and kind of everything, estate planning guidance, life insurance review, and all the financial questions that come up from time to time. I don't limit my clients on how often we meet or how often they talk to me, whereas other advisors charge 1%, or maybe some even charge less, but all they really do is investment management. So sometimes I see prospects or just again, other people that I'm talking to in my network comparing advisor fees by the, you know, say percentage of assets under management. And they are probably comparing apples to oranges.

SPEAKER_00 18:08

Definitely. And I think that too goes back to like make sure you understand what services you're getting for the fee that you're paying. So I think of financial planning as one piece, investment management as the other piece. So you have these two pieces. Some advisors, like you, Carla, you do both. Some don't do both. So I don't do investment management, I just do planning. Now I still give investment advice and we'll tell you which buttons to click, but I'm not actually going to manage those investments. So if you were sitting there like comparing our two services, they're actually different in what we're offering. And so what you're saying too, it's like some advisors charge that 1%, but offer no planning. So their fees are actually a lot, lot higher compared to the fees that you're charging because you include all these other services. And part of it too is what services do you actually need? So, for example, like someone that comes to me and they're like, I feel so nervous about investing. Like, I don't want to push these buttons. I just want someone to do it for me. Like, I am not the right answer for them, right? Because they're not going to be well served by the services I offer. I would recommend they consider working with someone who actually does manage investment. So being careful about matching those two. Super important and understanding what the fee is for what.

SPEAKER_01 19:33

Exactly. And similarly, I'll talk to prospective clients that they really love managing the money themselves. And it doesn't really work for me when we're both trying to manage the same account. Now, that being said, sometimes I have clients that they want to take a small portion of their money and manage that account on their own. And that's fine. That actually happens fairly often that a client wants to set aside an amount and they manage that account and I'm managing the rest, but it really just doesn't work when we're both trying to manage money. And I understand some people really like to have that full control over their money. So talking to Kelly, someone like Kelly is a great option so that they can sort of make sure that they're not making any major mistakes, that everything is on track. So I think again, just reiterating what we've already been saying, lining up the services that you need and want and understanding what you're paying for. Kelly, aside from these two big pieces, if someone is looking for a financial advisor and interviewing a f a couple of financial advisors, what are the key things that you think that they should be looking for?

SPEAKER_00 20:46

Yeah. Good question. So a couple pieces. Like one, I'd say the basics, making sure they have knowledge, experience. Like you can look at, you know, employment history, you can look at credentials, you can look at their FINRA SEC reports to make sure all those things are clean. I think like the basics, make sure you're comfortable that they they know what they're doing, and like that's reasonable. And there's all sorts of, you know, the CFP designation, certified financial planner, like that to me, like there are wonderful advisors with it and wonderful advisors without it, right? But it is at least a level of something that you know they've gone through certain education, they've taken a test, they pass the test successfully, like you can have a little more comfort and some of that background. But if someone doesn't have it, that doesn't mean they're a bad planner. It just means they haven't taken a test for one reason or another. Like again, there are some very wonderful planners who don't have it. But one thing to think about the designations, experience, have they been doing it for a while? Is this your are you their first client ever? Like understanding and knowing those things, especially as it relates ultimately. The fee you'll be paying. So again, basics, one thing. I think also the more important thing, like assuming that you know they're a good person, they have some experience, good, is really like, do you enjoy talking with this person? And are you going to be excited to share things about your life with them? If the answer is yes, great. If the answer is no, like keep looking. So, like the example, like I always think about is, you know, I work with millennial families. There's all sorts of stuff that happens in that time in people's lives. And so some of that might be families going through their fertility journey. So that might be more comfortable to share with another woman, fellow mom than it would be to share with your, you know, father's 60-plus year old investment advisor who has no idea what this stuff even means. So again, no shade against 60-year-olds. But there's a difference in like who you're excited to talk to about certain things in your life. So keeping that in mind, like that, I think to me is a huge piece. Like, do you like chatting with them? Are they enjoyable to work with? And really focusing on like, do they work with people like me? Are they experienced with people in my situations? So if you are looking for help with, you know, budgeting and student loans, don't go to someone who specializes in working with retirees and social security optimization. Those are two mismatch. So think about who do they work with? Do those people seem like they have similar problems to I do? And do I actually enjoy spending time with this person?

SPEAKER_01 23:40

Yeah, for sure. I I think you're right on Kelly. And I think, again, personality fit is really key because I get really personal often with my clients. I'm sure you do too. If you think about it, people are talking to us about things that they don't even talk about with their closest friends and family, right? You usually don't tell people outside of your spouse how much money you're making, how much money you have, and all of the pieces of life that comes with it. For example, when a client loses their job, it's that can be emotionally very difficult. And I want them to feel totally comfortable and not at all embarrassed for them to pick up the phone or pull up an email and let me know so that we can plan from there. And certainly it takes time for me and my clients to get to know each other and build that relationship. But if you listen to me talk and you just think, okay, Carla is not for me, I get that, right? Find someone that you can open up to. Yep. Yeah, exactly. Well, Kelly, this has all been really, really helpful. Do you have any other final thoughts on this topic?

SPEAKER_00 24:54

I think big picture to me, it's just finding the advisor that's right for you and offers the services that you need at a reasonable price. There is nothing wrong with using a fee-based advisor. There's nothing wrong with using an advisor that charges a flat fee or a percentage of assets or an hourly fee. Like every type of advisor and fee you can think of, there is going to be some conflict, right? So even thinking about, I think sometimes people hold up hourly planners on this pedestal, like, oh, it's you know the most pure way you're exchanging hour for hour. But also they are incentivized to take more time to do something because they'll get paid. There's all kinds of, you know, everyone has their own little quirk, but really finding that person that works best for you, that offers the services that work best for you. Like, I am not opposed to any kind of fee schedule or however advisors choose to earn their fee. I do think the advice we give is so valuable. The many good ones I know are probably undercharging just because of the wonderful advice they give, right? So really, I think, you know, find the advisor that's right for you, charges a reasonable fee in a way that works for you.

SPEAKER_01 26:12

Great. Thank you, Kelly. And I think, you know what? On that note, sometimes I feel that people are so reluctant to change advisors even when they're so unhappy. It's this very big mental hurdle for them. Well, I've been with this advisor. Are they gonna be mad at me? I just think, okay, number one, it's life. Okay, we've I think we've all lost clients for one reason or another over time. I have fortunately always had a very high retention rate, but we we all lose clients for for one reason or another over time. It's just part of business. But I also think there's so many amazing advisors out there. I I am part of this wonderful advisor community that you just it's your money, it's your future. You shouldn't put up with anything less than being really thrilled with your financial advisor. Amen.

SPEAKER_00 27:08

Yes, exactly. Like you deserve to be with someone wonderful. Don't be afraid to make the change.

SPEAKER_01 27:16

Okay, Kelly, thank you so much. And can you please give the the website so everyone knows how to find you if they are interested in potentially working with you? Sure. Yep, you can find me at thewealthyparent.com. Wonderful. Thank you so much.