Fee-Only Structure

Financial Planners who take commissions have a built-in conflict of interest ... even with disclosure, my choice would be a Fee-Only planner.

- Jane Bryant Quinn, Newsweek

If you want a planner with no potential compensation conflicts and with a legal obligation to put your interests first, hiring a fee-only registered investment advisor is recommended.

- Barbara Roper, Director of Investor Protection, The Consumer Federation of America

When initiating a relationship with a financial planner or advisor, the compensation structure is an important consideration. It is imperative that you not only know the amount of compensation, but also the method. There are three methods in which planners/advisors can be compensated: (1) fee-only; (2) commission-based; and (3) fee-based.

"Fee-only" planners/advisors are compensated solely by their clients and do not accept commissions or compensation of any kind from any other source. Compensation is based upon fees for consultation, plan development, or investment management services. The fees are charged on a project or hourly basis, an annual retainer, or on a percentage of assets under management or total net worth.

"Commission-based" planners/advisors are compensated by a third-party (generally a financial institution such as an insurance or investment company), who pays the planner/advisor commissions based upon the products purchased by a client in connection with the implementation of financial planning recommendations. Typically, there is no direct charge for advice or preparation of a financial plan (if one is prepared at all).

"Fee-based" planners/advisors are compensated from a combination of fees and commissions. A type of fee-based is "fee-offset", in which commissions from the sale of financial products are used to offset (reduce) the fees charged in the planning process.

The Clear Choice:

Kalorama Wealth Strategies strongly believes that a fee-only structure is the sole method of compensation that aligns the interests of the advisor and the client. Both commission and fee-based planners have an incentive to invest client money in products that pay the highest commissions. Kalorama adopted a fee-only structure to avoid the significant, inherent conflicts of interest that arise when an advisor is in a position to gain financially from the purchase of any investment or insurance product recommended to a client.

Kalorama is exclusively committed to helping clients achieve greater financial security and independence by providing independent and objective advice that has no potential of being conflicted by the payment of commissions or compensation of any kind from any other source other than our clients. With Kalorama’s strict adherence to a fee-only structure, you are assured that our allegiance is always with you — our client. As an independent, fee-only advisor, Kalorama is on your team.

What this means to you:

Fee Arrangements:

Financial and Investment Planning

After a complimentary initial consultation, depending on the scope and nature of the engagement, an hourly fee is charged to review your current situation, provide our recommendations, and assist with the implementation of the proposed plan. We will outline our understanding of the services to be provided, along with an estimate of our fees, in an engagement letter.

Portfolio Management

Kalorama calculates investment advisory fees based upon a percentage of the market value of the assets under management. Our fees generally range from 0.50% to 1.50% of assets under management.

Please contact us for additional information.

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