Key takeawaysAdvice-only financial advisors provide holistic financial planning but don’t manage your assets.Fee structures are typically hourly, project-based or flat-fee.It’s up to the client to implement advice from their advisor, who will provide as much guidance as needed. 

The do-it-yourself (DIY) method isn’t just for crafts, hobbies and home improvements. Many people also prefer to build their portfolios, implement investment strategies and manage their assets. Advice-only financial advisors provide financial DIYers with the education, support and guidance they need to successfully manage their investments and plan a successful financial future without handing over their portfolio or paying assets under management (AUM) fees.

What is an advice-only financial advisor?

An advice-only financial advisor is a professional who provides financial advice—including budgeting, investing and future planning—through a holistic, educational approach.

“The advice-only model prioritizes personalized education to help clients make well-informed financial decisions that they can implement themselves, with the advisor’s guidance,” says Cody Garrett, CFP and educator at Measure Twice Money.

While they might provide investment advice, they don’t manage your assets. Instead, the advisor sets clients up to manage their own portfolios. 

“We don’t focus just on investments, whereas a traditional advisor might be more interested in managing your assets for a fee,” says Avanti Shetye, CFA and CFP at Wealthwyzr, LLC. “We [consider] the overall financial plan—[like] generating a specific retirement income, reducing taxes over your lifetime and making sure that you achieve your goals—instead of just [targeting] a portfolio return number.”

What does an advice-only financial advisor do?

Managing assets is just one small part of what traditional financial advisors do. Depending on who you work with, your advisor might: 

Give investment advice and non-biased second opinionsProvide personalized financial education to help you make informed decisions and then give ongoing guidance as you implement themCollaborate on a financial plan and work with you to manage and update it as income, goals and life events changeWalk you through processes like rolling over your 401(k), claiming benefits, making trades and changing employee benefit electionsEducate you on tax benefits and liabilities and how to plan your finances in the most tax-efficient mannerRefer you to the best financial advisor to manage your portfolio and meet your specific needsHelp you find a broker for life insurance, disability or long-term care, then help ensure they act in your best interestProvide income and asset verification during the mortgage underwriting processHelp you plan for retirement and determine the best time to claim Social SecurityHold you accountable for implementing advice, making financial decisions and meeting your goalsProvide an extra set of eyes on financial statements, loan applications and tax returnsHow are advice-only advisors paid?

Advice-only advisors are typically paid in one of three ways: hourly, per project or through a flat fee, usually charged monthly. They are not paid commissions for any products or services they recommend.

Since they don’t manage assets, advice-only advisors typically don’t implement an AUM fee structure—the most common fee model for financial advisors, according to Envestnet. Shetye also says that AUM pricing can put pressure on the advisor to be active in the account to show their value to the client. For example, she suggests they could change strategies or add products at a time when the best course of action is to do nothing. 

Aubrey Williams, a financial advisor at Open Path Financial, notes that the AUM fee structure could also incentivize advisors to manage as many assets as possible. According to Williams, this could result in recommendations that might not make sense for the client, such as moving money from a 401(k) account that isn’t part of AUM to an IRA, which could result in higher fees and fewer legal protections.

There are additional benefits to paying an hourly, project-based or flat fee. Payments can be more predictable and you could get more transparent pricing. “With the traditional AUM model, fees get deducted automatically from the account and you don’t realize what you’re paying for, or you might not even realize what’s happening in the account,” says Shetye. “When you’re paying directly for advice, you know exactly what you’re getting and why.”

Because you actively pay your advisor, rather than an invisible fee being passively subtracted from your investment account, you could be more aware of your spending, which can help hold you and your advisor accountable, according to Williams. “[Clients] have to pry that money out of their wallet. And it’s a different feeling,” he says. “I want people to feel that. And if the value is there—if I’m changing the trajectory of their financial life—then that’s a no-brainer. But if I’m not providing value to them, then that can be our last meeting.”

Advice-only vs. fee-only vs. fee-based advisors

Advice-only advisors: These advisors might charge an hourly, project-based or flat fee for providing holistic financial and wealth management advice and planning for the client to implement on their own. They don’t manage assets, nor do they earn any commission on any recommendations they make.

Fee-only advisors: These advisors also charge an hourly, flat or AUM fee. Unlike advice-only advisors, they directly manage their clients’ investments. However, they don’t earn commissions from any product or service they sell. 

“Fee-only means that the person sitting across from me is the only person paying me for my services, so I know exactly who I’m working for,” says Shetye.

Fee-based advisors: These advisors are compensated through a hybrid of hourly, flat or AUM fees and commissions earned through selling a specific product or service. They manage your assets, but a conflict of interest could exist when they recommend products or services.

Who should consider an advice-only advisor?

An advice-only financial advisor might be a good fit for someone who doesn’t have much to invest (under $100,000 is a common benchmark) or doesn’t meet the minimum balance requirements of firms that charge AUM fees. They also work if you feel confident managing your investments and want financial advice, holistic financial planning or help with a specific financial need, like budgeting or improving cash flow. If you plan to manage your investments, Shetye recommends having some prior experience, though advisors will provide a lot of guidance as you manage your assets, rebalance your portfolio and implement their advice.

While technology has made managing your own investments more efficient, there’s still a learning curve that advice-only advisors can help with. It can be a process that might require multiple meetings as well as patience and commitment from the client, who ultimately is responsible for execution. Garrett recommends clients make sure they have the time, temperament and skill to manage their portfolios. 

He also points out that the right advisor depends on the client. “Different people need to be served differently,” he says. “[Advisors charging an AUM fee] serve delegators, whereas advice-only advisors serve validators.” In that sense, someone who likes to assign responsibilities to others might want their advisor to manage their assets. On the other hand, someone who likes to get in the weeds, check for accuracy and ensure validity on their own might prefer an advice-only advisor who provides support while they take the lead.

Pros and cons of advice-only financial advice