I hate to say it, but it depends. It depends on many factors: 1. how much money you have to invest, 2. when you plan on withdrawing it, 3. how often you want to trade (are you market timing or a buyand-hold investor?), 4. a planner’s minimums, 5. how much service you need and 6. the level of independence you want. To clarify first, “fee-based” tends to mean asset management fees charged by asset managers (i.e. a fixed percentage is charged on assets under management, billed monthly or quarterly) but financial planners who only charge an hourly fee (for investment advisory services or investment consulting) also fall in that category. Asset managers generally have a minimum asset level (e.g. $250,000 is a common minimum) and might charge 1 percent (so in this example, an annual fee of $2,500). If you are getting active management with individual stocks, this is cheaper than a no-load (i.e. no commission) passive mutual fund that might have an internal management fee of 1.5 percent (which you do not see because it is netted against the fund’s returns). If you are being charged an asset management fee on top of a portfolio of mutual funds, this might be costing you $4,000 to $5,000 a year in total adviser and fund fees. But you may be getting free financial planning and tax services from your adviser. If you use a full service transaction broker with your $250,000 to invest in individual stocks, you might be paying one-time trading costs and commissions of $2,500 to $5,000 on a basket of 25 stocks. Every time you buy and sell a stock or bond you will pay a commission and/or ticket charge. If you work with a broker who invests your $250,000 in their range of commission-based (i.e. load) mutual funds, you might pay one-time front end load commissions ranging from 3 percent to 5 percent depending on breakpoints ($7,500 to $12,500). If you are more interested in investing yourself but want to work with a independent financial planner (for validation or advice) who charges hourly fees, you might pay $1,000 to $1,500 for an investment plan with annual updates, probably costing $500 to $750 per year.

A true fee-only financial planner only charges fees and does not sell any products. There are few true fee-only planners because many people seeking planning are unwilling to pay the fee necessary to compensate the planner for their time and effort to develop a financial plan. There are many planners that offer “free” or “inexpensive” plans, with the plan of making commissions on selling investment or insurance products to you. The very first thing before even considering fee-only versus commission based is whether or not the planner is qualified. You should make sure that they are a CFP (Certified Financial Planner) or a ChFC (Chartered Financial Consultant). These designations signify that the planner is trained and qualified to assess your financial situation. To answer the question of which is better? Usually if you want truly objective advice then the fee-only planner has no benefit in making any recommendations to you and thus should be more objective. That being said, it does not mean you will not get good or objective advice from a nonfee-only planner. The best advice is to check with someone that has had a plan done and ask if they were happy with who they used, and if so start there.