Understanding Jargon, Conflicts of Interest, and Ethical Constructs in Financial Advice Pricing Models

 By John H. Robinson, Financial Planner (April 26, 2025)

The business of financial advice has been in a constant state of disruption for at least the 35+ years that I have been in the fray.  Although the manner in which consumers pay for financial services (advice and products) has evolved significantly over that period – most notably away from commission-based compensation and toward various fee-for service models – the debate over which model(s) best serve consumer interests is far from settled. 

Readers of my content know that my passion for financial planning is expressed through my prolific production of research papers, articles, and essays on a broad range of financial planning topics.  The structural and ethical considerations of advisor compensation models has been a particular longstanding research interest.  Collectively, my five essays listed below were composed over the past 20 years and provide detailed insights into the benefits and detriments of the primary pricing models.  They also serve to inform consumers about important nuances and considerations that are often overlooked in the public financial planning discourse.

In reading the essays, you will find that they offer a very different perspective from similarly-themed articles you may have read in the mainstream financial media. For instance, a popular narrative is to extoll the virtues of flat-fee and/or hourly billing while deriding traditional commission-based and asset-based compensation as conflicted and self-serving. These articles push back against moralistic positioning and expose the economic incentives that create conflicts of interest in all compensation models.  Each of these essays was written to stimulate debate and discussion within the financial community and, ultimately, to help advance financial planning as a profession for the benefit of American consumers.

To Fee or Not to Fee.  What’s the Difference Between Fee-Based and Fee-Only Financial Planning  (Fee-Only Planning Hawaii Blog, August 2024) 

This essay raises consumer awareness of the distinction between fee-only planning and asset-based (aka “fee-based”) advice and opines that financial advisors who charge asset-based fees foster confusion when they refer to their business models as “fee-only.”

The Future of Financial Planning Advice, Part 1 (Advisor Perspectives, 8/16/2022) 

This article takes a deep dive into the economic incentives, conflicts of interest, and unique structural considerations that factor into how financial advisors develop their practice pricing models. The central theme of the article is that the moralistic arguments in favor of hourly and flat-fee billing are overly simplistic and naïve in overlooking important structural nuances.

The Future of Financial Planning Advice, Part 2 (Advisor Perspectives, 8/23/2022) 

 This essay suggests that the long-established billing models in the legal profession are closely analogous to those in the financial planning space and points out the irony that hourly billing is promoted as virtuous in the financial planning world while it is vilified by consumers in the legal world.  The article also suggests that forecasts of impending decline and extinction of commission-based and asset based guidance compensations are likely misguided in the same way that 30+ years of predictions of the end of hourly billing in the legal profession have been, at best, grossly premature. The overarching theme of the article is that, like the legal profession, financial planning advice will likely continue to be available under multiple compensation models.

Why the Future is Bright for AUM-Based Advisors (Advisor Perspectives, 5/22/2017) 

Contrary to the title, this article is not intended to promote asset-based compensation as a superior pricing model.  Instead, the title was a tongue-in-cheek rebuttal to a respective thought leader’s prediction of imminent doom for financial planners who are compensated via AUM fees.  The article concurs with that person’s views on 1%+ flat AUM fees are hopelessly flawed but points out the potential advantages of tiered AUM models. It also discusses how financial planners can provide meaningful value to consumers in ways that competing robo-advised portfolio models cannot.  This article proved prescient, as the robo-advisor models that were boasting that they would replace financial planners at the time the article was written not only failed to scale to profitability, they served to validate consumers’ willingness to pay for personalized comprehensive planning advice.

Who’s the Fairest of the Them All:  A Comparative Analysis of Financial Advisor Compensation Models (Journal of Financial Planning, January 2006) 

This article was one of the first to suggest that all financial compensation models have conflicts of interest.  A major theme of the article is the suggestion that there is no single compensation model that is superior or is a best-fit for all consumers.  Its unique contribution to financial community thought leadership was the suggestion that financial planners might do well to offer more than one compensation model.  This bit of critical thinking shaped how my practice evolved over time, and I continue to reject the narrative that there is a single superior compensation model.

Summary – Theory & Practice and Evolving Thought Leadership

Some cursory readers of these essays might (incorrectly) conclude that I am a proponent of asset-based compensation models, and that I reject fee-only planning models.  That simply is not true.  These essays were written to present a more balanced and deeper perspective on all pricing structures.   Certain elements of my belief system, such as the view that all compensation models are conflicted, have remained the same since my initial 2006 paper, while my views on other issues, such as the merits of brokerage and insurance licenses, have evolved over time. 

For the record, my practice in 2025 is divided into two separate pricing models, both of which feature comprehensive financial planning guidance.  Financial planning Hawaii offers comprehensive financial planning guidance that includes ongoing portfolio management.  It operates under a tiered-AUM model that is presented on the   Pricing page of the Financial Planning Hawaii website.  Fee-Only Planning Hawaii provides comprehensive financial planning for a one-time flat fee that typically ranges between $3,000 and $7,000.  It does not include ongoing investment advice, but the client is welcome to enlist us again for future reviews on an ad-hoc basis. 

I am planning to drop my brokerage and insurance licenses within the year as they add unnecessary regulatory complexity and foster consumer confusion over our approach to financial planning. I would be remiss if I did not also mention that while FOPH offers hourly billing for certain special projects, I maintain that it is the most conflicted, least transparent compensation model and hourly billing is not part of FOPH’s regular financial planning advice model.

John “J.R.” Robinson is the owner/founder of Financial Planning Hawaii and Fee-Only Planning Hawaii and is a co-founder of personal finance software maker Nest Egg Guru.