A fee-only registered investment adviser is compensated solely by its clients and owes a fiduciary duty across the advisory relationship. A broker-dealer representative may be compensated by commissions and is held to Regulation Best Interest at the time of a recommendation. The difference is in compensation and in the standard's scope.
Both models are legal, regulated, and used by competent professionals. The distinction is structural rather than a matter of individual character, and it is worth understanding because the two answer to different rules and are paid in different ways.
The clearest way to see it is to compare the structures directly. Every row below describes how the models are set up, not how any particular firm behaves.
How the two are structured
| Dimension | Fee-only RIA | Broker-dealer |
|---|---|---|
| Who pays | The client, directly — typically a percentage of assets, a flat fee, or an hourly rate. No third-party compensation. | Can include client fees, commissions on products sold, and payments from product sponsors such as 12b-1 fees or revenue sharing. |
| Governing standard | Fiduciary duty under the Investment Advisers Act — duties of care and loyalty applying across the relationship, on an ongoing basis. | Regulation Best Interest, which applies to recommendations made to retail customers at the time they are made. |
| Regulator | The SEC or a state securities regulator, depending on the firm. | FINRA, with SEC oversight. |
| Disclosure document | Form ADV Part 2, plus Form CRS — describing services, fees, conflicts, and disciplinary history. | Form CRS, plus product-level disclosures such as a prospectus. |
| How conflicts arise | Chiefly through the fee structure itself — for example, advice that would reduce assets under management also reduces the fee. | Chiefly through product compensation — different products can pay the representative different amounts. |
| Continuing obligation | Ongoing, for the duration of the advisory relationship. | Attaches to recommendations; there is generally no ongoing monitoring obligation absent an agreement to provide it. |
Worth saying plainly
Neither structure removes conflicts of interest; they produce different ones, and both are disclosed. A fee-only adviser paid on assets under management has a structural reason to prefer advice that keeps assets invested with them. The point of reading Form ADV Part 2 and Form CRS is to see which conflicts you are choosing, not to find an arrangement with none.
Common questions
What is the difference between fee-only and fee-based?
Fee-only means all compensation comes from clients, with no commissions or third-party payments. Fee-based is a broader term describing arrangements that combine client fees with commissions or product compensation. The two sound similar and describe materially different structures, which is why the disclosure documents are worth reading directly.
Is a fiduciary standard always better for the client?
It is a broader and continuing obligation rather than one attaching to individual recommendations, but it does not eliminate conflicts and it says nothing about competence. A commission structure can also cost less for someone who trades rarely and wants no ongoing advice. The structures suit different needs.
How can I check which one an adviser is?
Ask for Form CRS, which every firm must provide, and Form ADV Part 2 from an investment adviser. Both are also searchable on the SEC's public adviser and BrokerCheck databases, which show registration status, the services offered, compensation arrangements, and disciplinary history.
This guide is provided for educational purposes by Jason Howell Company. It is general information, not investment, tax, or legal advice, and it does not account for any individual circumstances. Decisions described here generally require a CPA, an attorney, or both.