This article was written by our expert who is surveying the industry and constantly updating the business plan for a wealth management advisor.
Wealth management advisors charge AUM fees that directly impact your pricing strategy and business profitability.
Understanding these fee structures helps you set competitive rates, attract clients, and build sustainable revenue streams. The wealth management industry follows specific pricing conventions that vary by account size, advisor type, and service scope.
If you want to dig deeper and learn more, you can download our business plan for a wealth management advisor. Also, before launching, get all the profit, revenue, and cost breakdowns you need for complete clarity with our wealth management advisor financial forecast.
Wealth management advisors typically charge between 0.5% and 1.5% annually on assets under management, with 1% being the standard rate for accounts under $1 million.
Fees decline through tiered structures as account balances grow, with rates dropping to 0.45%-0.50% for portfolios exceeding $5 million.
| Account Size | Typical AUM Fee | Advisor Type | Key Characteristics |
|---|---|---|---|
| Under $250,000 | 1.0% - 1.5% | Independent Advisors | Higher fees for smaller accounts; often minimum account requirements apply |
| $250,000 - $1 million | 1.0% | Large Banks | Standardized fee schedules; broader service offerings included |
| $1 million - $2 million | 0.75% - 0.85% | Boutique Firms | Personalized service; flexible fee negotiations possible |
| $2 million - $5 million | 0.60% - 0.75% | All Types | Tiered structures begin reducing total cost; comprehensive planning included |
| Over $5 million | 0.45% - 0.60% | All Types | Significant fee compression; additional services often negotiated separately |
| Alternative: Flat Fee | $2,000 - $7,500/year | Fee-Only Planners | Fixed annual cost regardless of portfolio size; predictable expenses |
| Alternative: Hourly | $250 - $300/hour | Independent Planners | Pay-as-you-go for specific advice; suitable for limited consultations |
What percentage of assets under management do wealth management advisors typically charge?
Wealth management advisors typically charge between 0.5% and 1.5% annually on assets under management, with 1% being the industry standard for most client accounts.
The median AUM fee hovers around 1.0% on the first $1 million of client assets. This percentage represents the annual cost clients pay for portfolio management, investment advice, and ongoing financial guidance. Advisors calculate this fee as a percentage of the total portfolio value and deduct it periodically throughout the year.
The 1% benchmark applies most consistently to accounts between $250,000 and $1 million. Smaller accounts under $250,000 often face higher fees ranging from 1.25% to 1.5%, reflecting the higher service cost relative to account size. Conversely, larger portfolios benefit from economies of scale, with fees declining progressively as assets increase.
Most wealth management advisors in the industry structure their AUM fees to align with client portfolio growth. When your clients' portfolios increase in value, your revenue increases proportionally without requiring fee adjustments. This creates a natural incentive for advisors to maximize portfolio performance, as their compensation directly correlates with client success.
How do AUM fees differ between independent advisors, large banks, and boutique firms?
Independent advisors, large banks, and boutique firms charge AUM fees that reflect their service models, overhead costs, and target clientele, with variations in both pricing and flexibility.
| Advisor Type | Typical Fee Range | Service Characteristics | Fee Negotiation |
|---|---|---|---|
| Independent Advisors | 0.75% - 1.25% | Personalized service with direct client relationships; flexible service packages tailored to individual needs; often fiduciary standard | More flexible; advisors can adjust fees based on client circumstances and relationship complexity |
| Large Banks (Wirehouses) | 1.0% - 1.5% | Standardized fee schedules; access to proprietary investment products; broader institutional resources and research | Less flexible; typically follow firm-wide fee schedules with limited room for individual negotiation |
| Boutique Firms | 0.80% - 1.35% | Specialized expertise in specific client segments; personalized attention; curated investment strategies | Moderate flexibility; can customize fees for high-value clients or specific service arrangements |
| Robo-Advisors | 0.25% - 0.50% | Automated portfolio management; limited human interaction; algorithm-driven rebalancing | Fixed pricing models; no negotiation available |
| Hybrid Models | 0.50% - 1.0% | Combination of automated services and human advice; tiered service levels based on account size | Some flexibility in higher tiers; lower tiers follow standard pricing |
| Private Banks | 0.75% - 1.25% | Concierge-level service for high-net-worth clients; comprehensive wealth planning; estate and tax services | Negotiable for ultra-high-net-worth clients; often bundled with other premium services |
| Regional Firms | 0.85% - 1.15% | Local market expertise; community connections; personalized service at scale | Moderate flexibility; dependent on local market competition and client relationship |
Are wealth management fees tiered, meaning they decrease as account size increases?
Wealth management fees use tiered structures that progressively decrease as client account balances grow, rewarding larger portfolios with lower percentage rates.
The tiered fee model charges different percentages on different portions of a client's total assets. A typical structure charges 1.0% on the first $1 million, then 0.85% on the next $1 million, 0.70% on assets between $2 million and $5 million, and approximately 0.45% on assets exceeding $5 million. This graduated approach reduces the effective overall fee rate as portfolios grow.
Two primary tiering methods exist in wealth management: graduated schedules and cliff schedules. Graduated schedules apply different rates to specific asset ranges, so a $2.5 million portfolio pays 1.0% on the first $1 million, 0.85% on the second million, and 0.70% on the remaining $500,000. Cliff schedules apply a single rate based on the total account value tier, so the entire $2.5 million portfolio might pay a flat 0.75%.
Most established wealth management advisors prefer graduated schedules because they provide smoother transitions between fee levels and avoid dramatic fee changes when clients cross tier thresholds. This approach also better reflects the actual service costs, which don't decrease proportionally with account size.
You'll find detailed market insights in our wealth management advisor business plan, updated every quarter.
What is the industry average AUM fee for accounts under $1 million?
The industry average AUM fee for wealth management accounts under $1 million is 1.0%, though smaller accounts often pay slightly higher rates.
Accounts between $500,000 and $1 million consistently see the 1.0% standard rate across most advisor types. This threshold represents a sweet spot where advisors can provide comprehensive service while clients receive meaningful value from professional management. The fee on a $750,000 account translates to $7,500 annually, which covers portfolio management, quarterly reviews, financial planning, and ongoing communication.
Accounts between $250,000 and $500,000 typically face fees ranging from 1.0% to 1.25%. Many advisors set $250,000 as their minimum account size specifically because fees below this threshold don't adequately compensate for the service time required. A 1.25% fee on a $300,000 account generates $3,750 annually, which barely covers the operational costs of comprehensive wealth management services.
Accounts under $250,000 often encounter fees between 1.25% and 1.5%, if advisors accept them at all. Some wealth management practices implement strict minimums of $500,000 or even $1 million, effectively pricing out smaller accounts entirely. Advisors who serve this segment often do so through simplified service models or as a business development strategy to build long-term relationships with clients expected to accumulate significant assets over time.
What is the typical AUM fee for accounts over $1 million and how much does it decline at higher thresholds?
Wealth management fees for accounts exceeding $1 million decline progressively through tiered structures, with rates dropping from 0.85% to as low as 0.45% for portfolios over $5 million.
| Account Balance Range | Typical Fee Rate | Effective Annual Fee Example | Fee Reduction Impact |
|---|---|---|---|
| $1 million - $2 million | 0.75% - 0.85% | $1.5 million account: $12,000 at 0.80% (calculated as 1% on first $1M + 0.80% on next $500K) | 15-20% reduction from base 1% rate on incremental assets |
| $2 million - $3 million | 0.65% - 0.75% | $2.5 million account: $19,000 at blended rate (1% on first $1M, 0.85% on second $1M, 0.70% on remaining $500K) | 25-30% reduction from base rate on assets in this tier |
| $3 million - $5 million | 0.55% - 0.70% | $4 million account: $29,500 (graduated across tiers) | 30-40% reduction from base rate on assets in this tier |
| $5 million - $10 million | 0.45% - 0.60% | $7 million account: $42,000 at blended rate | 40-50% reduction from base rate on assets in this tier |
| $10 million - $25 million | 0.35% - 0.50% | $15 million account: $65,000 at blended rate | 50-60% reduction from base rate on assets in this tier |
| Over $25 million | 0.25% - 0.40% | $30 million account: $100,000 - $120,000 annually depending on structure | 60-70% reduction from base rate; often requires custom negotiation |
| Ultra-High-Net-Worth ($100M+) | 0.10% - 0.30% | $100 million account: $150,000 - $300,000 annually | Highly negotiable; may include flat fees for specialized services |
Are there additional fixed fees or retainers charged on top of the AUM fee?
Many wealth management advisors charge additional fixed fees or retainers for comprehensive financial planning services beyond basic portfolio management.
Financial planning retainers typically range from $2,000 to $10,000 annually, depending on the complexity of the client's financial situation. These fees cover services like estate planning coordination, tax strategy development, insurance analysis, retirement income planning, and multi-generational wealth transfer strategies. Advisors separate these charges from AUM fees because they require specialized expertise and time investment independent of portfolio size.
Some advisors structure their practices with distinct service tiers. A basic AUM fee covers investment management and quarterly reviews, while enhanced planning services require an additional retainer. For example, an advisor might charge 1% AUM plus a $5,000 annual planning fee for clients requiring sophisticated tax optimization, business succession planning, or complex estate strategies.
One-time financial planning fees represent another common charge structure. Advisors charge $3,000 to $15,000 for comprehensive financial plan development, which includes analyzing current finances, creating detailed projections, and developing strategic recommendations. Clients then pay the ongoing AUM fee for implementation and portfolio management. This two-part fee structure works well for wealth management practices that want to ensure proper compensation for intensive upfront planning work.
This is one of the strategies explained in our wealth management advisor business plan.
Which services are fully included in the AUM fee, and which require separate charges?
AUM fees typically cover core portfolio management and basic financial planning, while specialized services often require additional charges.
- Portfolio Management Services (Included): Investment selection and asset allocation across stocks, bonds, and mutual funds; regular portfolio rebalancing to maintain target allocations; ongoing market monitoring and tactical adjustments; trade execution and coordination with custodians; performance reporting with benchmarking against relevant indices
- Basic Financial Planning (Included): Quarterly or semi-annual client review meetings; retirement savings projections and goal tracking; general investment advice and education; net worth statements and cash flow analysis; coordination with existing tax and legal advisors
- Communication and Reporting (Included): Regular performance statements and account summaries; online portal access to view holdings and transactions; email and phone consultation for routine questions; annual investment policy statement reviews; market commentary and educational materials
- Comprehensive Financial Planning (Often Separate): Detailed retirement income distribution strategies; sophisticated tax planning and loss harvesting strategies; estate planning coordination and document review; insurance needs analysis and policy recommendations; education funding strategies and 529 plan management; business succession planning for entrepreneurs
- Specialized Services (Usually Separate): Tax preparation and filing services; legal document preparation for trusts and estates; Real estate investment analysis and management; Concentrated stock position strategies and hedging; Alternative investment due diligence and access; Philanthropic planning and donor-advised fund management
How often are AUM fees billed and on what account balance date are they calculated?
Wealth management advisors most commonly bill AUM fees quarterly, though annual billing remains an option, with calculations based on either beginning balance, ending balance, or average daily balance.
Quarterly billing dominates the industry because it smooths cash flow for both advisors and clients while reflecting more current portfolio values. Advisors typically deduct fees within the first two weeks of each quarter for the previous quarter's management. A client with a $1 million portfolio paying 1% annually sees quarterly deductions of approximately $2,500, adjusted for actual portfolio value at the measurement date.
The balance calculation method significantly impacts fee amounts, especially in volatile markets. Beginning-of-quarter balance calculation charges fees based on portfolio value on January 1, April 1, July 1, and October 1. End-of-quarter balance uses March 31, June 30, September 30, and December 31 valuations. Average daily balance calculates the mean portfolio value across every day in the quarter, providing the most precise measurement but requiring more sophisticated systems.
Most established wealth management practices use average daily balance calculation because it most accurately reflects the actual assets under management throughout the period. This method prevents clients from feeling penalized if their portfolio temporarily declines just before a quarter-end measurement date. It also eliminates gaming opportunities where clients might time deposits or withdrawals to manipulate fee calculations.
Annual billing occurs less frequently but appeals to some clients who prefer seeing only one fee deduction per year. Advisors using annual billing typically charge in advance based on the January 1 portfolio value, which can create cash flow challenges if markets decline significantly during the year. Some practices offer a small discount (typically 0.10% to 0.15%) for clients who choose annual billing to compensate for the timing difference.
Do advisors use beginning balance, ending balance, or average daily balance to compute fees?
Wealth management advisors use three primary methods to calculate AUM fees: beginning balance, ending balance, or average daily balance, with each approach creating different outcomes for clients and advisors.
| Calculation Method | How It Works | Advantages | Disadvantages |
|---|---|---|---|
| Beginning Balance | Fee calculated on portfolio value at the start of the billing period (e.g., January 1, April 1). Formula: Starting Balance × (Annual Fee Rate ÷ 4) | Simple to calculate and explain; predictable for clients; favorable when markets decline during quarter; easy to verify | Doesn't reflect portfolio growth during period; advisors miss fees on gains; can feel unfair if portfolio grows significantly |
| Ending Balance | Fee calculated on portfolio value at the end of the billing period (e.g., March 31, June 30). Formula: Ending Balance × (Annual Fee Rate ÷ 4) | Captures portfolio growth during period; aligns fees with current value; simple calculation; rewards advisor for performance | Penalizes clients if markets drop just before measurement; creates timing risk; may feel unfair after market declines |
| Average Daily Balance | Fee calculated on the mean of portfolio values every day during the billing period. Formula: (Sum of All Daily Balances ÷ Days in Quarter) × (Annual Fee Rate ÷ 4) | Most accurate reflection of assets managed; eliminates timing games; fair through market volatility; industry best practice; prevents manipulation | Requires sophisticated systems; harder to calculate manually; more complex to explain; needs daily valuation data |
| Average Monthly Balance | Fee calculated on average of month-end balances within the quarter. Formula: (Month 1 + Month 2 + Month 3 ÷ 3) × (Annual Fee Rate ÷ 4) | Smoother than single-point measurement; easier than daily average; reduces timing risk; reasonable compromise | Less precise than daily average; still subject to month-end volatility; not as common in industry |
| High-Water Mark | Fee calculated on highest portfolio value reached during the period, regardless of ending value | Maximizes advisor revenue; incentivizes aggressive growth strategies | Unfair to clients during volatility; can charge fees on unrealized gains later lost; rarely used in wealth management |
| Mid-Point Balance | Fee calculated on portfolio value at the middle of the billing period (e.g., February 15 for Q1) | Single measurement date; simpler than daily average; reduces timing extremes | Arbitrary measurement point; doesn't reflect full period activity; uncommon in practice |
| Adjusted Beginning Balance | Beginning balance adjusted for client contributions and withdrawals during period | Fair accounting for cash flows; prevents fees on deposits; reasonable for clients making frequent changes | Complex tracking required; subjective adjustment decisions; requires detailed recordkeeping |
Are there minimum account sizes required to qualify for certain fee levels?
Wealth management advisors establish minimum account size requirements that determine fee structures and service eligibility, with thresholds typically ranging from $250,000 to $1 million depending on the advisor type and service model.
The $250,000 minimum represents the entry point for many independent wealth management practices. This threshold ensures advisors generate sufficient revenue to provide comprehensive service while covering operational costs. At a 1% AUM fee, a $250,000 account produces $2,500 annually, which barely covers the time investment for quarterly meetings, portfolio management, and client communication that characterizes quality wealth management.
Mid-tier wealth management firms often set $500,000 minimums to focus on clients who justify more intensive service offerings. These practices typically include comprehensive financial planning, tax strategy coordination, and estate planning guidance within their AUM fee. The $5,000 annual revenue from a $500,000 account at 1% supports dedicated relationship management and access to institutional-quality investment platforms.
Premium wealth management firms and private banks frequently require $1 million to $2 million minimums. These elevated thresholds allow advisors to deliver white-glove service including dedicated relationship managers, custom portfolio construction, alternative investment access, and concierge-level responsiveness. Some ultra-high-net-worth focused practices set minimums at $5 million or $10 million, serving exclusively clients with complex wealth management needs.
Exceptions to minimum requirements occur when advisors see long-term relationship potential. Young professionals with high income trajectories, business owners with growing enterprises, or inheritors expecting future wealth transfers may gain entry below stated minimums. Some practices create "emerging wealth" programs with modified service models specifically designed for clients building toward standard minimums.
We cover this exact topic in the wealth management advisor business plan.
How do AUM fees compare to alternative fee structures like flat annual fees or hourly planning rates?
AUM fees, flat annual fees, and hourly planning rates each serve different client segments and advisory business models, with significant variations in cost structure and service scope.
| Fee Structure | Cost Range | Best Suited For | Pros and Cons for Your Wealth Management Business |
|---|---|---|---|
| AUM Fees | 0.5% - 1.5% annually on assets | Clients with investable portfolios; those wanting ongoing management; investors focused on portfolio growth | Pros: Revenue scales with client wealth; aligns incentives with growth; recurring revenue stream; predictable business model. Cons: Can be expensive for large portfolios; revenue declines in market downturns; may deter clients who prefer transparent costs |
| Flat Annual Fee | $2,000 - $7,500 per year | Clients wanting comprehensive planning; those with complex finances but modest portfolios; professionals seeking holistic advice | Pros: Predictable revenue regardless of market; attracts clients with lower assets; positions you as planner not salesperson; easier to serve diverse client base. Cons: Doesn't scale with client wealth; requires clear service boundaries; more difficult to justify value; annual renewals needed |
| Hourly Planning | $250 - $300 per hour | Clients needing specific advice; DIY investors wanting second opinions; those in transition phases; one-time planning needs | Pros: No minimum commitment; flexible service delivery; attracts younger clients; can charge premium rates for expertise. Cons: Unpredictable revenue; no ongoing relationship; time tracking required; difficult to scale; clients may delay necessary meetings |
| Retainer Plus AUM | $3,000 - $10,000 retainer + 0.50% - 0.85% AUM | High-net-worth clients with complex situations; business owners; those needing estate and tax planning | Pros: Properly compensates for planning work; creates revenue floor; justifies comprehensive service; attracts sophisticated clients. Cons: More complex to explain; higher total cost may deter prospects; requires demonstrating distinct value; two billing systems needed |
| Monthly Subscription | $100 - $500 per month | Younger professionals; mass affluent segment; clients building wealth; those wanting accessible advice | Pros: Low barrier to entry; predictable monthly revenue; appeals to younger demographics; easier client acquisition. Cons: Requires volume to be profitable; service scope must be clearly defined; technology-dependent delivery; higher client turnover |
| Performance-Based Fees | Base fee + 10% - 20% of returns above benchmark | Sophisticated investors; those with high risk tolerance; clients seeking aggressive growth; institutional-style arrangements | Pros: Potential for higher earnings; strong performance incentive; attracts performance-focused clients. Cons: Regulatory restrictions apply; revenue highly variable; can encourage excessive risk-taking; complex accounting required; not suitable for most retail clients |
| Project-Based Fees | $5,000 - $25,000 per project | Clients facing specific events; business sale planning; divorce financial planning; inheritance management | Pros: High revenue per engagement; clear scope and deliverables; attracts clients avoiding ongoing commitments. Cons: No recurring revenue; requires constant marketing; feast-or-famine revenue pattern; difficult to scale |
What recent trends are emerging in the industry regarding AUM fees and pricing transparency?
The wealth management industry is experiencing significant shifts in fee structures, with increasing pressure toward transparency, declining fee rates for high-net-worth clients, and adoption of alternative pricing models.
Fee compression represents the dominant trend affecting wealth management advisors in 2025. Traditional 1% AUM fees face downward pressure, particularly for portfolios exceeding $5 million, where clients increasingly negotiate rates to 0.50% or lower. This compression stems from increased competition, greater client sophistication, and the availability of low-cost investment alternatives like robo-advisors charging 0.25% to 0.50%. Advisors differentiate themselves by demonstrating value beyond basic portfolio management through comprehensive financial planning, tax strategies, and estate coordination.
Regulatory changes and client demands drive unprecedented fee transparency requirements. The SEC and state regulators enforce stricter disclosure standards, requiring advisors to clearly itemize all fees, including underlying fund expenses, trading costs, and third-party charges. Forward-thinking wealth management practices proactively provide comprehensive fee breakdowns showing total cost of ownership, even when not legally required, to build trust and demonstrate value relative to alternatives.
Alternative fee models gain market share as advisors seek to serve broader client segments. Flat annual fees ranging from $3,000 to $7,500 attract mass affluent clients with complex needs but modest portfolios who would pay excessive amounts under traditional AUM structures. Monthly subscription models between $100 and $500 appeal to younger professionals building wealth who want ongoing advice without meeting high account minimums. Hybrid models combining reduced AUM rates with planning retainers allow advisors to properly compensate for non-portfolio services while maintaining reasonable total costs.
Tiered pricing structures become more granular and customized. Rather than simple three-tier models, sophisticated practices implement five to seven tiers with smaller breakpoints and more gradual fee reductions. Some advisors create custom fee schedules for individual clients based on service complexity, portfolio characteristics, and relationship longevity. This customization requires clear documentation and consistent application to avoid regulatory scrutiny or client perception of unfair treatment.
Conclusion
This article is for informational purposes only and should not be considered financial advice. Readers are encouraged to consult with a qualified professional before making any investment decisions. We accept no liability for any actions taken based on the information provided.
Understanding AUM fees is fundamental to building a profitable wealth management practice.
The industry operates on established conventions while allowing flexibility for advisors to differentiate through service quality, specialized expertise, and transparent communication that builds lasting client relationships.
Sources
- AdvisorFinder - Understanding AUM Fees
- Approach Financial Planning - What is AUM Fee
- Kitces - Independent Financial Advisor Fees Comparison
- SmartAsset - Asset Based Fee Guide
- SmartAsset - Financial Advisor Cost
- SmartAsset - Retainer Fees for Financial Advisors
- Alden Investment Group - Financial Advisor Fee Structures
- PlanCorp - Wealth Management Cost
- ThinkAdvisor - Cerulli Fee Trends
- Bankrate - Financial Advisor Cost Guide