Why Fee-Only

Generally financial advisors are paid either by charging fees or earning commissions.

Commission-Only Advisors earn their income by selling financial products such as insurance or mutual funds, or may also earn a fee for trades that they execute.

Fee-Only Advisors earn their income by charging fees. Some common methods include an hourly rate, an annual or retainer fee or as a percentage of investments under management.

Fee-Based Advisors earn their income using a combination of fees and commissions.

It may seem like semantics but we believe it is very important to know what you are paying and how. Some advisors may not tell you what fees you are paying unless you ask.  Be sure to find out about the fees, sales charges, loads, commissions or any other costs you may incur up front. Sometimes compensation methods may not be as obvious they should be.

Loads: A "load" is another term for sales charge. If you are buying an A share there is an up-front sales charge of usually around 5%, but can be as much as 8%. A B share does not have an up-front charge, but requires you to own the fund for a certain period of time, typically 5 to 7 years. If you wish to sell the fund before then, you will pay a charge at that time. At Brown Wealth Management, we use "no-load" mutual funds to eliminate these charges.

Expense Ratio: The expense ratio is the percentage of the total fund assets that is used to cover expenses. These include management fees, which are paid to the fund manager, and operating expenses.

12b-1 Fees: These are additional marketing and distribution fees that are added to a fund. These are included in the calculation of expense ratio and sometimes called a "hidden load." Often, a portion of these fees is used to compensate financial advisors, so this is an additional expense you may not be aware of. The average expense ratio of a fund with 12b-1 fees is 1.21%, compared to 0.62% for funds without these fees. The greater your investments, the more these numbers affect your returns.

At Brown Wealth Management, we do not rely on any of these sales charges or fees for our compensation. This allows us to remain objective and select investments that are in the best interest of fulfilling your personal financial goals. Some advisors who claim their services are "free" are really just being paid in other ways, and potentially in ways that may not be best for your personal financial goals.