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Advisors employ a variety of fee structures in response to client demand, economic realities and business strategy. Choosing the right fee structure is a balance between ensuring clients receive enough support and keeping costs reasonable for both parties.

Whether charging by the hour, project or subscription, it’s important for clients to understand how financial advisor fees work. Contact Financial Advisors OFallon Illinois for more information.

Asset-Based Pricing

Asset based pricing involves paying your financial advisor a percentage of the total value of your managed assets. This fee structure is commonly used by wealth management firms and robo-advisors. This type of fee structure is also popular amongst high-net-worth clients. These individuals typically have substantial portfolios, so they want to see a clear and compelling value proposition. Asset based pricing offers this by directly linking your fees to your portfolio’s performance.

The exact amount you pay will depend on the financial planning strategies your advisor employs, their level of experience and acumen, as well as the advisory firm they work for. However, the average annual asset-based fee is around 1%. This figure can seem small and negligible on paper, but it may be a large proportion of your net worth if you have a large portfolio.

Many advisors who use an asset-based fee model establish minimum assets required for new clients. Additionally, they may offer a tiered pricing system that reduces your fees as the value of your portfolio grows. This helps clients feel encouraged to build their wealth over time.

Another option for clients is to pay a flat fee. This is a pre-determined fee that is paid by the client for a specific set of services over a period. This model can be attractive to high-net-worth clients, as it eliminates the uncertainty and complexity associated with asset based pricing.

However, a disadvantage of this model is that it removes the incentive for your advisor to grow your portfolio. This can be problematic if you are looking for comprehensive financial advice rather than just investment management.

Hourly Consultation

The financial planning landscape has evolved to encompass a greater range of services. As a result, financial advisors have also had to reassess how they charge for their services. Historically, most firms relied on commission-based compensation methods, reflecting a sales-driven approach to financial advice. But as the industry has shifted toward a more holistic, client-centric service model, many advisors have transitioned away from commissions and into a variety of different fee structures.

One of the most popular models is the assets-under-management (AUM) fee. This fee structure charges clients a percentage of their total assets, with the majority of this fee covering investment management. However, this model has some drawbacks. For one, it’s difficult to accurately calculate a client’s total wealth by relying on AUM fees alone, as many services may be bundled into the fee.

Another challenge is that AUM fees are often opaque and difficult to understand. As a result, they can be hard to compare across advisors. For example, consider two advisors who provide similar services to a $1 million portfolio. One advisor may use a bundled fee model, with 60% of the AUM fee attributed to portfolio management and 40% to financial planning. Meanwhile, the other advisor may use an unbundled fee model and charge a flat hourly rate for financial planning and a separate project rate for investments.

A flat hourly rate simplifies customer billing by charging clients a predetermined amount for each hour of service. This can be especially useful for a client who needs help with a single planning session or project, such as creating a budget. As a bonus, this model can be flexible and scaleable, with clients able to customize the number of hours charged per project.

Subscription Fees

The bundled AUM fee model remains popular with many advisors. According to 2024 research from Envestnet | MoneyGuide, 62 percent of advisors use an AUM-based fee structure.

This approach is a good option for clients who want comprehensive advice and planning that goes beyond investment management. However, some clients may find it difficult to compare fees based on the AUM model versus other options that are more transparent and easy to understand.

That’s why some firms are offering alternative, more simplified, and transparent fee structures. These include flat, hourly, and retainer fees. In the future, these alternative models may pave the way for more efficient and more effective ways to serve a wider range of client needs.

Regardless of the pricing model you choose, it’s important to ensure that your fee structures are aligned with your clients’ goals and expectations. That way, you can provide them with the most value and help them meet their financial goals.

The following fee comparison tool allows you to evaluate the impact of different fee structures on your net worth over time. The calculator includes an estimated annual cost for each model based on your inputted current net worth, your expected retirement age, and the duration of your relationship with your advisor. It also illustrates the differences between an AUM % fee and a subscription fee. The AUM fee applies to assets the adviser manages; the subscription fee generally covers the household balance sheet, including any accounts “held away” like 401(k)s and cash.

While the AUM fee model remains a mainstay in the advisory industry, new approaches to fee models are starting to gain acceptance. As the scope of financial planning grows, it’s likely that more households will embrace a wide variety of pricing models to suit their individual needs and preferences.

Percentage-Based Fees

With a percentage-based fee structure, your financial advisor charges a fixed fee based on the size of your investment portfolio. This can be a good option for investors looking for clear, upfront pricing and those who are interested in long-term relationship with their financial advisor. However, it’s important to consider the amount of work your adviser does for each dollar of your portfolio. For example, a 1% fee on a $2 million portfolio represents $20,000 in annual fees. If you have a $65,000 per year net investment income after taxes, that translates to over 30% of your net spendable income being taken away by an advisor’s fee.

The benefit of this type of fee structure is that it incentivizes your financial advisor to grow your investment portfolio so that they can continue charging the same fee, which makes this a popular choice for many investors. However, this can also create a conflict of interest as your financial advisor may have an incentive to sell you the products that they are earning commissions from.

A recent study by Veres shows that for smaller clients, the typical all-in fee is a little over 1% of your investment portfolio (which includes 0.5% for financial planning and management and another 0.50% for underlying product and platform fees). For investors with larger portfolios, the all-in costs are lower.

To make it easier to compare advisor fees, we have created a calculator that allows you to input your current net worth and desired retirement age and see how different fee structures impact your overall cost. This helps you evaluate the options available to you and find an advisor who can help you pursue your family’s financial goals with confidence.

Unbundled Fees

Unbundling fees allows advisors to better align their services with client needs. For example, if Susie charges her clients an AUM fee of 0.6% and Calvin offers hourly consultations for planning and other service work, their clients will pay the same total amount (the difference between their AUM fees is the portion allocated to each type of service).

The unbundled approach can also reduce the logistical complexity and potential psychological wear and tear on investors who must juggle multiple types of payments, which may be a big part of why the number of firms using multiple pricing methods has actually decreased over time. According to Kitces Research, nearly three-quarters of advisory firms use multiple pricing models, including AUM, commissions, and other service-based fees.

In addition to bundling and unbundling their fees, some advisors offer a hybrid payment model upfront, whereby they charge a fixed fee for project-based work such as estate planning or retirement planning and then bill by the hour for any additional ongoing work. This approach can help ensure that clients know what to expect from their firm and gives advisors the flexibility to adjust fees as needed.

As a result of these trends, it’s important for advisors to understand how their pricing structures compare to those of their peers. For example, based on 2024 Kitces Research on Advisor Productivity, 58% of advisory firms offer graduated fee schedules, which allow clients to pay lower fees as their assets grow and higher fees for larger asset levels. However, this approach can create revenue gaps if investors aren’t willing to pay the higher fee thresholds or if firms have not clearly defined their ideal client profile.

Marketing is the driving force behind successful businesses. It shapes how products and services reach customers, influences buying decisions, and builds long-term brand loyalty. In today’s competitive marketplace, understanding the fundamentals of marketing and applying effective strategies can make all the difference between growth and stagnation.

Whether you are promoting a small business or managing a larger operation, marketing plays a vital role in creating visibility and connecting with the right audience.

The Role of Marketing in Business

At its core, marketing is about communication. It tells the story of a product or service and explains why it adds value to customers’ lives. By connecting businesses with consumers, marketing helps establish trust, increase sales, and foster relationships that extend beyond a single transaction.

Marketing also allows businesses to stand out in crowded industries. With countless options available to customers, a clear and compelling marketing message can highlight what makes one product or service unique.

Key Elements of Effective Marketing

Marketing is built on a few essential components that determine how successful a campaign will be.

Understanding the Target Audience

The foundation of any marketing strategy lies in identifying the right audience. Knowing who the customers are, what they need, and how they behave helps businesses tailor messages that resonate. Audience research involves studying demographics, interests, and buying habits.

Crafting a Strong Message

A clear message communicates the value of a product or service. Effective marketing speaks directly to customer needs, offering solutions and benefits that appeal to their goals and challenges.

Choosing the Right Channels

Marketing is most effective when it meets customers where they are. From digital platforms to traditional media, the right channel ensures that the message is seen and heard by the intended audience.

Measuring Results

Successful marketing strategies rely on data. Tracking performance helps businesses understand what works, make adjustments, and maximize return on investment.

Traditional vs Digital Marketing

Marketing has evolved, moving from traditional methods to a strong focus on digital strategies.

Traditional marketing includes print advertisements, billboards, radio, and television. These channels still play a role, especially for reaching broad audiences.
Digital marketing uses online platforms such as social media, email campaigns, and websites. It offers more targeted outreach and measurable results.

While digital strategies are growing rapidly, combining traditional and online marketing often creates the most effective results.

Popular Marketing Strategies

Businesses today have a wide range of strategies to choose from, each with its own strengths and purpose.

Content Marketing

Creating valuable content, such as blogs, videos, and guides, positions a business as an authority in its industry. It builds trust, engages customers, and improves visibility in search results.

Social Media Marketing

Social media platforms allow businesses to connect with audiences in real time, share updates, and build community. Consistent posting and interaction foster stronger customer relationships.

Email Marketing

Email remains a powerful tool for reaching customers directly. Personalized campaigns nurture leads, promote offers, and keep audiences informed.

Search Engine Optimization

Optimizing websites for search engines ensures that businesses appear when customers are actively looking for their services. Strong SEO practices improve online visibility and attract organic traffic.

Influencer and Referral Marketing

Word of mouth remains one of the most trusted forms of marketing. Influencers and referrals help spread credibility through trusted voices.

The Importance of Branding in Marketing

Branding and marketing go hand in hand. A strong brand creates recognition, trust, and loyalty. Marketing communicates the brand’s values, personality, and promises, ensuring customers know what to expect.

Consistency in branding across all marketing channels strengthens recognition and sets businesses apart from competitors.

Building Relationships Through Marketing

Modern marketing is not only about sales; it’s also about building long-term relationships. Engaging customers through meaningful communication fosters loyalty and encourages repeat business.

When customers feel valued, they are more likely to return, recommend products to others, and become advocates for the business. This approach turns one-time buyers into lifelong supporters.

Challenges in Marketing

While marketing offers tremendous opportunities, it also comes with challenges. Competition is intense, and consumer behaviors are constantly changing. Businesses must stay adaptable, innovative, and responsive to new trends.

Another challenge is balancing creativity with strategy. A campaign must capture attention but also deliver measurable results. Staying updated with evolving technology and shifting customer expectations is essential for ongoing success.

Future of Marketing

The future of marketing will continue to be shaped by technology and consumer preferences. Personalization is becoming more important, as customers expect tailored experiences. Data-driven strategies, artificial intelligence, and automation will help businesses deliver targeted campaigns more efficiently.

Sustainability and social responsibility are also rising as key factors. Customers are more likely to support businesses that align with their values and contribute positively to society.

Marketing is the heartbeat of business growth. It informs, inspires, and influences customers while building lasting relationships. From traditional methods to digital innovations, marketing strategies provide endless opportunities to connect with audiences and stand out in a competitive world.

By understanding customer needs, crafting strong messages, and embracing both creativity and data, businesses can create powerful marketing campaigns that drive results. In the ever-changing landscape of commerce, mastering marketing is the key to long-term success.

Financial Advisor Fees Explained