What Does “Fee-Only Financial Planner” Really Mean?

There are so many different words floating around out there to convey someone who helps you with your money. Here are some – by no means all – that you may be familiar with: financial planner, financial advisor, investment advisor, money coach, fund representative, portfolio manager, stockbroker, and on and on…

That alone is confusing enough to the layperson (who exactly are you supposed to tap for help with your particular financial situation?) – but now on top of the various words used, an extra layer of complexity is added! This layer has to do with how that person is compensated for helping you with your money.

Here’s another list, by no means exhaustive: commission-based, transaction-based, fee-based, fee-only, advice-only, fee-for-service. One might start to wonder if there is a raison d’etre for the proliferation of so many descriptors.

And hey, what about accreditation? You should probably use someone who is accredited so they know whereof they speak and there is a whole list of designations for this, which will not be produced here.

Let’s just go with the fact that it’s a better bet to use someone who has a designation. Here’s an acronym for you: FPSC or Financial Planning Standards Council. This is a body that oversees approximately 17,000 Certified Financial Planners (CFPs). Out of these, the stats are that fewer than 1,000 are true “fee-only” planners.

That’s an interesting thing. Why would that be? Some say that there just isn’t that much demand for fee-only planners. I suggest that education comes before demand. If people knew the difference, would the demand grow?


So what is a fee-only financial planner? It is someone who receives a fee from you for delivering unbiased financial planning and advice to you for your benefit. They sell you nothing but their own expertise applied to your particular situation. This fee could be set at an hourly rate or it could be a flat fee established ahead of time for a certain service that you are seeking, e.g. retirement planning or entrepreneurial planning.


Compare that to commission-based financial planners who get paid not by you but by companies who make the financial products that they sell to you. Who would you rather get your advice from: someone you are paying or someone another entity is paying? That’s a rhetorical question.


Compare that to fee-based financial planners who get paid a percentage of assets under management. This feels better, doesn’t it? Definitely there is more transparency here. At least you are playing on the same team in that if your assets increase in value, the fee-based financial planner stands to make more money. But let’s look at it from the other side. If your assets decrease in value, you lose money but they continue to make money as they always get paid whether your assets grow or shrink. Yes, to be sure, they make less if your assets shrink but they still make something whereas you lose. Also, fee-based does not negate commissions being paid to the advisor and you know only if commissions are paid to them if they are forthcoming with this information and I’m sure some of them are.

It is your money and definitely your choice.

The New School Team


Community Bonds – Ethical Investments

Guest Post I wrote for SeeChange Magazine


Community bonds offer a new asset class for investors, but what are the pros and cons of this social investment option?

A Play

A nonprofit/social enterprise walks into the bank.

Nonprofit/Social Enterprise

We’d like to borrow $80,000 of capital to fund our social enterprise.


No. This is new and scary.

Banker flees the scene. Social enterprise gets creative and reaches out to the community.


Nonprofit/Social Enterprise (to the community)

How would you all like to help fund our social enterprise by purchasing community bonds?

The Investment Community

What are those?

Nonprofit/Social Enterprise

Well, each of you could purchase a small bond, let’s say $1,000, which we will use over the next five years. In five years, we will return your investment plus 5% interest.

The Investment Community

Wow! I’ve always wanted to invest locally and socially beyond socially responsible mutual funds. Where do I sign up?

Eighty community members purchase community bonds. The nonprofit/social enterprise is a complete success. Everyone rejoices.



Want to invest socially and locally? It’s time for investors to start thinking about community bonds as a new asset class.

Community bonds are a new addition to the growing movement called social finance. Many times, we only hear about the benefit of community bonds from the social enterprise/nonprofit perspective, but we rarely hear about the pros and cons of investing in community bonds as a new asset class for investors.

So, what are the risks and rewards of investing in your local community?

Investment Pros:

1. Further diversification for private investors. Community bonds are not correlated to financial markets like publically traded bonds. Therefore, they offer an amazing opportunity for investors to invest in fixed income products whose prices and yields are not impacted by market interest rates.

Jargon-free translation: If you purchased a community bond offering 5% over five years, you’d earn 5% in five years regardless of whether market interest rates dropped.

2. Offers greater yield than most GICs.

Community Bonds are structured like a non-redeemable GIC, a guaranteed investment certificate. While there are several types of GICs, for the purposes of this article, we will stay with the most popular type of GIC, which is a non-redeemable GIC. With a non-redeemable GIC, you lend the bank $100 when you buy a $100 GIC and they promise you a 2.5% return if you don’t sell that GIC for however much time, let’s say five years. So, in five years, you’ll get back $102.50 back – guaranteed.

Right now, most five-year non-redeemable GICs at the major banks are offering interest rates of 2-3%. Most community bonds offer 5% over five years, which is much higher.

3. Low-Risk – Most community bonds add your investment to a pool of money that is designed to fund a portfolio of social projects, not just one. A great example of this is SolarShare. Solarshare Community Bonds help to fund The SunField Projects– 17 solar installation projects in Ontario and the WaterView Projects.

By investing your money into many different projects, the default risk is lowered. If one project fails, there are 17 other projects providing cash flow. Additionally, many of the social projects have existing government contracts, so the future cash flow for the projects are guaranteed.

Community bonds are not risk-free like a GIC. Do your research. Find out what projects you’re investing in and what the company plans to do about it if they don’t meet their targeted goals.

4. Many community bonds are sold in small increments, from $500 up to $10,000 bonds, to make it accessible for everyday investors.

Investment Cons:

1. Not a lot of options. Community bonds are an up and coming asset class. Right now, there are only a limited number of social enterprises that are starting to raise money this way, and community bonds can sell out very quickly.

2. Only a few are RRSP eligible. Mostly, community bonds end up being a non-registered investment. This means you will pay tax on any interest earned. Some community bonds, such as Toronto’s Centre for Social Innovation, were RRSP eligible, however, your bank may not be equipped for you to hold them in your RRSP, so returns remain taxable.

3. Little to no liquidity. Like a non-redeemable GIC, once you’ve purchased your community bond, the money stays there. There is no secondary market to buy and sell your bonds, so if you need that money within the investment period, you won’t be able to cash out. Over time, I foresee community bonds as the next emerging asset class for private investors looking for a low-risk social investment.

Some examples of community bonds in Ontario

1. SolarShare

Series of Solar Powered Projects, renewable energy

$1,000 bonds + $40 co-op membership fee = 5%/year over 5 years.

2. ZooShare

Developing a 500KW bio gas plant in Toronto

$500 – $5,000 community bonds

7% over 7 years

3. Options for Green Energy

Series of green initiative projects

$100 for co-op membership + loan amount = 5% guaranteed on the amount you invested over 5 years.

4. West End Food Co-op

Sustainable food in Toronto’s West End supporting new community Food Hub at Queen and Dufferin, including a community kitchen, local food workshops and events, and a retail space featuring local farmers and producers. (closed)

$500 bond + $5 co-op membership = 2.5% over 2 years

New To Investing? Don’t Get Ripped Off

Most first-time investors purchasing mutual funds know that the price tag of a fund is the MER – the Manager Expense Ratio – but time and time again I hear horror stories from clients who had no idea their mutual funds also came with Deferred Sales Charges attached, and are shocked to learn they owe money when they want to transfer their money out.

Deferred Sales Charges are “back-end” sales fees that essentially locks in your money for a certain period of time, often 7 years, regardless of the fund’s performance. If the fund is losing money and you wish to transfer your investments elsewhere during the lock-in period, the Deferred Sales Charge kicks in and there is a penalty, sometimes as high as 5.5% of the amount you want to transfer out. On a $50,000 investment, you’d have to pay $2,750 just to transfer your money.

Watch out!

Many times, these expensive sales charges are difficult to find and may not even be listed on the investment company’s website and buried in a large prospectus that the average first-time investor is not going to read. Back-end sales charges combined with excessive fees and MER’s well over 2% hurt many first time investors who are locked in, overpaying and can’t get out.

This happens all too often leaving a bitter taste in many investor’s mouths and it’s a shame. It doesn’t have to be this way.

Mutual funds can offer efficient diversification and can be a great place to put your hard earned money. Fortunately, there are plenty of investment options that won’t lock you in or overcharge.

Get educated. Make sure you know what you’re paying, how you’re paying it and when it’s owed before you sign on the dotted line.

Avoid Mutual Fund Rip Offs

  1. Do not pay over 2% MER for mutual funds of any type
  2. Avoid any back-end sales charges (DSC)
  3. Avoid front-load sales charges
  4. No locking in – unless it’s a GIC