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Fees & pricing
How advisors charge for advice, and how pricing is changing across the industry.
Most independent advisors charge a percentage of the assets they manage, billed quarterly and usually on a sliding schedule that falls as a household’s assets rise. Others charge flat or retainer fees, subscription fees for ongoing planning, hourly rates, or commissions on products sold, and many firms combine more than one.
Pricing is under steady pressure. Cheaper investment products, model portfolios and automated platforms have made portfolio management alone harder to charge for, so firms increasingly bundle planning, tax and estate work into the fee. How clients are charged for cash, through sweep programs at custodians and broker-dealers, has also drawn scrutiny from regulators and in lawsuits.
Financial ADVSR covers how firms price advice, fee disclosures in regulatory filings, and the disputes that follow.
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Questions
How do financial advisors charge?
The most common model is a percentage of assets under management. Alternatives include flat annual or retainer fees, subscription pricing, hourly fees for project work, and commissions on products. Firms describe their fees in Part 2A of Form ADV, which clients receive and which is publicly available.
What does fee-only mean?
A fee-only advisor is paid only by clients, not through commissions or other payments from product providers. Fee-based is a different term: it usually describes an advisor who charges fees and can also earn commissions.
What is fee compression?
The gradual decline in what firms can charge for a given service, driven by low-cost funds, competition and automated investment platforms. Firms typically respond by adding services, such as tax and estate planning, to justify their fee.
Where can I see an advisory firm’s fees?
Registered investment advisers disclose their fee schedules and billing practices in Form ADV Part 2A, the firm brochure, which can be looked up on the SEC’s Investment Adviser Public Disclosure website.