Today’s Wall Street Journal article on the different ways to pay for advice offers a reasonable perspective on the state of the market. However, Micah Hauptman, a financial-services counsel at the Consumer Federation of America, does a significant disservice to fee-only advisors when he says: “Every model can have conflicts of interest… The fee-only adviser has an interest in capturing assets. They might recommend rolling 401(K) assets into an IRA that they would manage. Doing that may not be in the investor’s best interest.”
First, fee-only advisors generally take an affirmative pledge to be a fiduciary to their clients, which means that they agree to work in their clients’ best interest, notwithstanding any conflicts. Commission-based brokers and hybrid advisors have no such duty and take no such pledge. Second, the fee-only advisors in our practice (and others) advise clients to keep assets wherever it is best for their clients, whether that’s a 401k or an IRA. And the compensation structure of most fee-only firms creates little or no incentive to aggregate assets in a way that is disadvantageous for a client. Rarely are the conflicts as pronounced as in the commission-based environment.