Altfest is a fee-only fiduciary advisory firm. We do not accept commissions or gifts from the funds we invest in. We only choose what we believe is best for each client on an individualized basis.

Compensation of Financial Advisors

Before 1982, many financial advisors were paid on commission, which meant they received payment for every action they took on your behalf. Whenever the advisor bought or sold a product, the advisor got paid by the provider.

But a group of innovative financial advisors pushed back against the commission-based model, seeking to instead put the client front and center. They wanted to positively impact the lives of their clients instead of pushing financial instruments that may not be in their client’s best interest. This group of advisors, including our founder Lew Altfest, created the fee-only model. Fee-only advisors do not accept compensation based on the products they recommend, thus removing a serious conflict of interest.

Altfest takes this one step further by utilizing an “assets under management” (AUM) model. This model provides further incentive to our firm to provide you with the best investment advice, because we win when our clients win. Since our risk is aligned with yours, if an investment falls short, there is a loss both for you and for us.

Additionally, Altfest is structured as a fee-only Registered Investment Advisor (RIA), meaning that we are required by law to always act in your best interests, which is not true for most other financial advisors. AARP, The Wall Street Journal and CNBC all have recommended using fee-only advisors.

It is important to be careful when evaluating an advisor, as a new term called the “fee-based” model is very similar to “fee-only” but is very different. The fee-based model is a combination of commissions from sales plus additional revenue from assets under management. As Geof Brown, the President of NAPFA, told the Chicago Tribune “Fee-based is tossed around a lot in the industry to disguise the fact that someone is compensated by commission and fees,”1

So to illustrate this; if a fee-based investment manager recommends adding a mutual fund made up of small-cap funds into your portfolio, they can choose one that will pay them a high commission. If the fund performs well for you, they also receive additional compensation as your assets under their management increase. The advisor would earn less if the fund does not do well, but they would still have made money from getting you into the fund.

Altfest prefers the fee-only structure because when our investments perform well, both Altfest and our client make money. Should our investments underperform, then we both lose together. In contrast, the fee-based plan ensures that no matter what happens the advisor always makes money, even if the client does not.

Ethics of a Financial Advisor

Altfest is governed by a higher standard of care: that of a fiduciary. A fiduciary is an advisor who must put the interest of their client over their own and do what is best for the client. The fiduciary standard has two parts, a duty of loyalty and a duty of care. This higher standard requires Altfest to:

1. Report any possible conflicts of interest to their clients.
2. Strive for the best combination of low costs and quality of investment vehicles.
3. Altfest employees cannot buy a security before we buy it for you to avoid raising the price for you or benefiting from our advice to you.

If Altfest recommends the buying of a mid-cap mutual fund, Altfest does not take a commission from that mutual fund in any way.  Financial Planning decisions are also custom tailored to fit both your needs and your interests. Altfest applies our fiduciary obligation to both our investment management and our financial planning advice.

Altfest has, from its founding in 1983, always been fee-only and a fiduciary. Altfest does diligent research in an effort to ensure every investment choice for each client is correct for that client in terms of cost, risk and prospects for future performance. Lew Altfest was a founding member of the National Association of Personal Financial Advisors (NAPFA), an association that requires members to be fee-only and always put their clients’ interest above their own.

Altfest prides itself on being early to promote the idea that the interest of the client and the firm should be aligned. We can remain dispassionate about the advice we give and stay passionate about helping our clients. Then we all win.

¹Chicago Tribune, “Fee-only financial advisers are different from fee-based” by Anya Kamenetz, May 12, 2015;  ²Investopedia.com

The foregoing content reflects the opinions of Altfest Personal Wealth Management and is subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.

Past performance is not a guarantee of future results. All investing involves risk, including the potential for loss of principal. There is no guarantee that any investment plan or strategy will be successful.

Investment advisory services provided by Altfest Personal Wealth Management (“APWM”). All written content on this site is for information purposes only. Opinions expressed herein are solely those of APWM, unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made by our firm as to another parties’ informational accuracy or completeness. All information or ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation. All investing involves risk, including the potential for loss of principal. There is no guarantee that any investment plan or strategy will be successful.