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'Advice-Only' means that the fees are equal to the number of hours of effort that the adviser puts in for each client
- This is how a doctor or a lawyer charges their clients
- This is almost the opposite of fees that are a percentage of the client's assets under management (fees that are a percentage of the client's assets under management are usually extremely high fees)
- Because 'Advice-Only' is very new in India, to keep things simple for the client, many 'Advice-Only' SEBI RIAs (including myself) currently charge a fixed fee
'Advice-Only' Financial Planning fees are transparent & cost-effective
- Ironically, that is why there are only 12 established Advice-Only Financial Planners in India (see the FAQ page, FAQ #5 for details)
- Jason Zweig, who wrote the chapterwise commentary in Benjamin Graham's book 'The Intelligent Investor' explained this in his weekly investment column in The Wall Street Journal:
- "Advisers who charge for their services through an investment-management fee while appearing to give financial planning away [for free] have trained the public to believe investing is arcane and expensive, while financial planning is mundane and unimportant. The opposite is closer to the truth: Investment management is a commodity whose market price has dropped close to zero, whereas the advice and judgment of a good financial planner can do wonders for your net worth"
- "Think of any field worthy of being called a profession, and its practitioners tend to charge clients on a fee-for-service basis. They base their billing on what they did for you, not on how much money you have. Your lawyer won’t take 1% of your estate for drafting all your legal documents; he bills by the hour or a flat one-time fee. Your doctor doesn’t take 1% of your net worth even for curing you of a potentially fatal disease; she charges you for the procedure. Financial advisers, too, should charge for advice directly—instead of indirectly under the cover of investment-management fees"
- In this bit of a podcast, I have explained the conflict of interest involved in a RIA charging a client a percentage of the client's net worth
- This article explains why 'Advice-Only is the sub-set of Fee-Only that is in the best interest of the client'