The Most Common Way Advisors Charge: A Percentage of What They Manage
If an advisor manages your investments, the most common arrangement by far is charging you a percentage of that account every year — the industry calls this an AUM fee, for "assets under management." Kitces Research (2024) put typical AUM fees at roughly 1.0–1.2% a year on accounts under $1 million, tapering to about 0.8–1.0% on accounts over $2 million. The same research found about 86% of advisory firms still use this model as their main source of revenue.
The percentage usually drops as your balance grows, which is worth understanding in real dollars, not just as a rate. On a $500,000 account at 1%, that's $5,000 a year. On a $2 million account at 0.9%, that's $18,000 a year — a lower rate, but a much bigger dollar figure. Always ask an advisor to translate their fee into what it actually costs you at your balance, not just the headline percentage.
- Fees are usually billed quarterly, taken directly from the account
- The rate typically declines in tiers as your balance crosses certain thresholds
- What's included for that fee varies a lot — ask specifically what services come with it
Not sure where you stand? The Axel Index shows you where your planning has gaps — before decisions become difficult to reverse.
Find My Blind SpotsOther Ways Advisors Get Paid
A percentage-of-assets fee only works if an advisor is actively managing your investments. If you mainly want a one-time plan, or ongoing advice without handing over portfolio management, other models are common:
- Flat fee — a set dollar amount, often for a specific plan or a defined scope of work, independent of your account size
- Hourly rate — billed for time, similar to how an attorney or accountant might charge
- Retainer — a recurring fee, often monthly or annually, for ongoing access and planning rather than investment management specifically
- Commission — paid by the product provider when you buy something (an insurance policy, certain funds) rather than by you directly — worth asking about explicitly, since it changes whose interests the advisor is structurally aligned with
None of these is automatically "better" than a percentage fee — it depends on what you actually need. Someone who wants a single retirement plan reviewed once might do better with a flat fee than an ongoing percentage. Someone who wants a person actively managing a portfolio and available for decisions as they come up may find the percentage model matches what they're using it for.
Why the Percentage Model Confuses People
A percentage doesn't feel like a real number until you convert it to dollars for your own account — and it keeps changing every year as your balance moves. It also compounds quietly: a 1% annual fee on a growing account costs more in dollar terms every year, even if the rate never changes. Neither of those things makes it a bad deal by itself, but they're exactly why comparing "1%" to "a $3,000 flat fee" without doing the actual math for your situation can be misleading in either direction. Ask any advisor to show you the real dollar cost at your current balance, and what that would look like if your balance doubled.
The value estimate above is an average across many people and years — some years more, some years less, often concentrated in one big decision rather than showing up as a steady annual return — so it isn't the kind of number that nets cleanly against a fee. Both are real, independently sourced figures. Read what the research says good advice is worth, and weigh it against what you'd pay for your own situation.
What you'll actually pay depends on which model an advisor uses and how they apply it to your account — the type of fee matters as much as the number itself. Ask any advisor directly how they charge, what it comes to in real dollars at your balance, and what's included — and get it in writing before you decide.
Know the cost. Now weigh it against what good advice is estimated to add — an introduction to a specialist advisor is free either way.