More and more, advisors who want greater flexibility to serve their clients and run their business are opting to go fee-only. In fact, firms operating in a fee-only model But dropping your FINRA licenses and shifting to a fully fee-based business model isn’t a decision you should take lightly. So, how can you know whether making a move is the right choice for you? Consider the following pros and cons—and remember, when and how you transition can make all the difference.

The Pros

There are clear advantages for you, your clients, and your prospective clients when taking the fee-only route.

1. Presenting yourself as a fiduciary. There is a huge benefit to promoting yourself to clients and prospects as a pure fiduciary. It’s a clear acknowledgment that you act in your clients’ best interests and provide them with objective advice—something clients increasingly expect as they become better versed in the various financial advice models available to them.

2. Transparent fee structure. Unlike the commission world of registered representatives, the compensation structure for fee-only advisors is aligned with client interests. Clients pay a flat fee (based on total assets) for services received, so they know where their money is going.

3. Fewer regulatory restrictions. Depending on your business model, you’re subject to SEC and/or state regulations, not to FINRA. Dropping your FINRA license means fewer continuing education requirements. In addition, you generally benefit from shorter disclosures and a less-frequent audit cycle.

4. Marketing flexibility. When going fee-only, you’re not subject to the same restrictions in how you present yourself to prospective clients. And, as a fiduciary, you’re able to promote yourself as someone who puts client interests ahead of your own.

5. Succession opportunities. Being a fee-only firm can provide new opportunities for mergers, acquisitions, and succession planning. RIAs looking to sell their businesses are more likely to engage with another RIA than a firm affiliated with a broker/dealer.

The Cons

On the flip side, you’ll face added challenges as well. (To learn more about what to expect when going fee-only, see our article, Are You Really Ready to Be a Fee-Only Advisor?)

1. Infrastructure investment. If you plan to open your own RIA, you’ll need to consider added costs that may include building out infrastructure, vetting technology, and hiring service providers.

2. Compliance risks. As an independent RIA, you’ll also assume the responsibility (and risk) of running your own compliance team. This includes drafting advisory agreements, completing regulatory filings, and hiring the proper legal help. As an IAR-only advisor, you receive compliance oversight from the RIA you affiliate with.

3. Loss of commissions and trails. The ability to choose the right products for your clients is one advantage of operating as a fee-only advisor. There are certain products, however, such as most variable annuities and some alternative investments, you’re no longer able to offer because they’re commission based. In addition, when dropping your FINRA licenses, you also give up the ability to retain any upfront or trail commission compensation.

4. Difficult decisions. It’s possible you may also have to end relationships with some of your commission-based clients if they’re not good candidates for an advisory account solution. However, this could present an opportunity to streamline your book and focus only on clients who align with where your business is headed.

When and How to Make the Move

If you still think transitioning to fee-only is the right move for you and your clients, the next step is to decide when. Take a look at your current book of business. In general, firms that are best suited for a fee-only business model:

  • No longer sell commission products
  • Have at least 90 percent of their current book in advisory business
  • Have low trail revenue (10 percent or less recurring nonadvisory revenue over the previous year)

Finding the right partner to affiliate with can also have a huge impact on the future of your practice. You’ll want to ensure that the service and support your partner offers—whether technology, marketing, practice management, or research—will give you what you need today and as you grow. It’s also important to find a firm whose values and culture align with your own. That way, you’ll know you have the backing of a partner that can stand by you for the long term, so you can focus on your clients and where you want to take your business.

This post originally appeared on The Independent Advisor, a blog authored by subject-matter experts at Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser.