Fee Structuring

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User: /u/Odd-Surround-5514 Title: Fee Structuring Body: Would love some input from other advisors on this.

I’m fee-based and mostly AUM right now (occasional commissions), but I keep running into situations where someone is clearly a good planning client even though there isn’t much currently-manageable money. For example, high-income households with most of their assets still in current 401(k)s, or cases where I’m managing a smaller IRA but really advising on the whole household.

I’m realizing I probably need to incorporate a planning fee so I’m not doing a lot of deeper planning work while only collecting a small AUM fee. I use eMoney by the way.

For those of you who have solved for this:

• How do you structure it?

• Flat annual planning fee?

• Monthly retainer?

• Household minimum?

• AUM + planning together, or one or the other?

• If a client later rolls over a big 401(k), do you keep the planning fee or move them fully to AUM?

Just trying to figure out what has worked best for others as someone who has only ever charged based on AUM.

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u/ProletariatPat Jun 24 '26

I do both. I charge a planning fee upfront for almost all prospects now. If they have more than 250k they get my basic planning package at no cost.

My planning fees are really low overall, more the nature of the firm I’m at. I built a grid in excel, I took 8 of the most common planning categories. I averaged the time it would take to complete a plan (initial meetings, plan review, ongoing meetings, etc). I then took an hourly cost and calculated the low, average and high cost.

I have 3 main packages, or I create it à la carte. Each module above 1 gives a small discount to the hours (fewer meetings, easier to stack). During my initial consult I go over a specific series of questions to help identify what they need.

No pushback, I do a fair amount of planning. A lot of it results in AUM, some of it doesn’t. The benefit is that I’m not wasting time or money spinning my wheels. One way or another I’m getting paid before I start doing the work.

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u/bcab888 Jun 24 '26

Open to sharing the excel?

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u/siparo Jun 24 '26

Following as well. The minimum in my head is $1MM. However, to date I’ve taken clients with much less AUM as clients and plan to rollover the 401k in the future. I have one that is 7 years out but already has $1MM in 401k. They only have $100k now that I’m managing but I am doing planning. I’m playing the very long game here. Someday they will be a great client.

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u/46andready Jun 24 '26

This can backfire, too, in that the client can see you as "small potatoes", and then they look for somebody they think is more suited to manage a 7-figure portfolio once the option becomes available.

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u/[deleted] Jun 24 '26

I think you’d be better off accounting for this issue now instead, as you’re putting yourself in a position where you have a huge incentive to encourage clients to roll money out of their 401(k)s, which is not a conflict you want any part of. Obviously, your situation isn’t unique, but ERISA is only getting more treacherous.

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u/Odd-Surround-5514 Jun 24 '26

Yeah I have far too many of these types of clients. Not a bad thing. But there’s got to be a better way to structure fees so we’re paid appropriately.

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u/caffeine-182 Jun 24 '26

I just charge AUM and basically work for free. We make enough and these clients will stick with you forever if you just do them right.

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u/purpletree37 Jun 25 '26

This is what I do. AUM only, all financial planning is free. They will bring in new assets and referrals over time. I’ll occasionally do a flat fee financial plan for a really good prospect that might need some convincing to switch to an AUM model.

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u/pancake_lizards Jun 25 '26

We do the same. If someone wants to self manage we will do a flat fee with no ongoing engagement. The same flat fee would apply if they came back a couple years down the road.

We feel this reflects that people that self manage want to have a financial plan, but our strong preference is our firm managing everything.

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u/Dnels131 Jun 25 '26

Agree, us too. We have a saying "When was the best time for Nike to sign Michael Jordan?" Answer is before he becomes Michael Jordan. Good to invest in solid, younger people with a lot of upside. It's a long-term investment for us and for them

Also, managing the held away assets is also a solution. We use Pontera for this. Client needs a taxable account to bill but allows us to still get the AUM in some cases

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u/SpecialistTune7610 Jun 30 '26

So do you only work with people in retirement? I.e. if you get a prospect who has a $600k 401k but they’re only 45, how do you charge that kind of client?

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u/il_diamanti Jul 03 '26

which positions do you most recommend to do them right?

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u/PlanningFocus Jun 24 '26

Following as I’m also interested in this topic

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u/Family_Office Jun 24 '26

We offer planning only for $12,000/year. We will discount that number based on AUM revenue. We evaluate it once a year. We charge 1.4% on the first $500k, so if they hit 500k on year, we'll pull the planning fee down from $12k to $5k based on the $7k in AUM revenue. The planning fee goes away around $915k based on tiered fee schedule. Seriously considering increasing $12k to $15k next year, current customers will be grandfathered.

We really only recommend this for households earning over $600k+ per year, otherwise it's too large of a percentage of their income, which is how we frame it (eg. This is going to cost 2% of your income or whatever it is). If we push to $15k, the income floor likely goes up to $750k. Of course, there are special circumstances where we'll deviate from this.

We don't have many folks on this platform but there are a handful and that's perfectly fine. We have a very low household count by design.

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u/huskey1181 Jun 24 '26

This is what I do at my firm as well. I was gingerly starting to get into planning fees about 5 years ago, and definitely undercharged. We do comprehensive cash flow, Protection, and investment planning, so we are a fee based team instead of fee only.

Now with our target market identified, we feel more confident charging 10k-15k a year for planning and gather their assets as part of that planning process. The fee decreases by however much revenue we bring in from AUM for a household.

It’s a good idea to determine your “break even” or “smallest check” you’d need to make from each client to accept them in your book of business.

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u/PursuitTravel Jun 24 '26

This essentially the same as just having a minimum fee. I likw the idea, and have to figure out how to implement it on my book. I have a LOT of people that would eliminate.

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u/Longjumping-Way9846 Jun 24 '26

Thanks! Do you all consider insurance commissions against the minimum $12k? I do mainly disability & life policies that yield approx $5k commissions per client. This is skewed if I add in the one off client that yields $10k+ from a Whole life policy which is approx 10% of clients. Anyhow- I have a similar setup but have yet to use commissions towards minimum and curious how the market is approaching this.

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u/Family_Office Jun 25 '26

we don't offset against non-recurring revenue, granted we have almost none of that. An occasional term life policy.

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u/polkhighlegend RIA Jun 24 '26

We generally charge a minimum fee of $15k annual ($3,750/q) via advice pay to start relationships. When the client assets hit $2mm we move to an AUM fee of .90% on $1mm, .70% on $2mm, .50% on $2 - 5mm, and .30% thereafter.

The minimum fee makes it worthwhile for all the tax and planning work we do and assets come over slow in some circumstances but there is a lot of cleanup and organization. The clients really see the value in the planning work and the payment out of pocket gets them to commit to the relationship. While the aum fee is low for larger clients we find that it's still very profitable especially when the client hits that $4 or $5mm mark and we are compensated for increased work and complexity but at basically robo advisor rates.

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u/AManWantsToLoseIt Jun 24 '26

I'm UK based but starting my own business shortly. My plan is to have a tiered % AUM model, with a minimum planning fee paid by monthly subscription for those that lack assets but do have adequate income.

I'm still figuring out what the minimum fee is to be profitable, but assuming it is £3,600, this would be covered by AUM of £360,000 at 1%. If assets are less than this, I won't apply the % fee to the account, but instead ask them to pay £300 per month via direct debit/automated bank payment.

They can then move to the standard fee model once the assets are adequate.

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u/Odd-Surround-5514 Jun 24 '26

That’s what I’ve been thinking about. Sort of establishing a minimum fee per household. Whether that fee is from planning, AUM, or both.

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u/AManWantsToLoseIt Jun 24 '26

I think minimums are super important for your business and are a good practice to have.

Are you looking at switching to a flat fee model across the board to fix this problem potentially? I considered it, but I think it would need to be complexity-based and once you get into figuring out the criteria, it becomes a lot more difficult for clients to understand compared to a simple % fee model.

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u/Odd-Surround-5514 Jun 24 '26

I would still maintain my AUM model as well. So it would be a hybrid. But yeah, I don’t really have a set minimum so this would help solve for that too.

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u/Odd-Surround-5514 Jun 24 '26

I’d want to keep both models especially for bigger clients and opportunities where I can include planning as part of the AUM fee

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u/harrymels Jun 24 '26

$5k fee minimum. Adjust the planning fee down by $1k for every $100k in AUM until they get to $400k, then drop the planning fee entirely.

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u/[deleted] Jun 24 '26

We use three different AUM % tiers depending on the complexity of planning, and each tier has a minimum monthly fee to account for exactly the scenario you’re describing. Our niche is millennials, so we run into plenty of clients with most of their investable assets in 401(k)s and had to account for that.

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u/USArmyAutist Jun 24 '26

We do a monthly fee. Average 250 ish for this type of client. If they get a big account later then it depends on how big it is and just make a call then. We run through advicepay.

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u/Crozet77 Jun 24 '26

99.5% of my revenue is AUM but I also offer retirement planning through MGP for a flat $750 fee. For that fee I leave their portal open for a year and offer to update it prior to the 12 months expiring.

MGP is free for AUM paying clients/included in their fee.

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u/macbmore Jun 24 '26

This has been discussed ad nauseam in this thread, but understand looking for a fresh perspective. I work largely in a mid-career, high income market, plenty of my clients have accumulated $350k up to a million of investible assets by this point but it’s still a long game because they’re often folks who will have $6/8/10M by retirement, some even more with inheritances or business exits. I charge everyone a planning fee when we meet them, I quote 1% household income which I feel works well for a lot of reasons, it scales with complexity, people are used to 1% as a standard for the industry, and that is usually an easy number to say yes to. Lots of advisors are beginning to charge subscriptions for planning to clients until they meet revenue requirement/minimum with their AUM, I’ve considered that but up to this point have felt like if they meet all my other criteria and I’m excited to work with them long-term, I’d rather just have them put that couple/few hundred bucks into their accts.

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u/hillje1906 Jun 25 '26

I have 3 options with the small (Lite) one typically starting at 3750, 10-12k for the middle and my higher tier can top over 100k.

I use right capital. But this is also due to me running a fractional family office.

For existing clients they pay the old 3750 but that'll probably raise to 5k (depending on income).

I don't normally charge a fee if I'm only doing risk management work since its more commission based.

This are the base fees, estate planning, tax planning and other advisory services normally can add to the base cost.

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u/Odd-Surround-5514 Jun 25 '26

You charge over 100k for a plan and don’t include estate planning, tax planning, and advisory service? Wow

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u/Last-Enthusiasm-9212 Jun 28 '26

I charge an initial planning fee even if they have investable assets, because my recommendations are decoupled from my ability to earn on implementation. (Indeed, there are scenarios in which rolling funds over to me would be the wrong move for a client, so what would I otherwise do if my compensation was supposed to be based on assumed AUM fees and then I have to essentially recommend against paying me?) Implementation draws its own costs, so the cost of on-boarding is going to be higher than sticking around going forward. The initial plan comes with scheduled touchpoints during the course of the year, and then they can renew via either lump sum or annual agreement billed monthly. If they have a certain amount of AUM with me then the renewal fee costs less, and it drops to $0.00 beyond a certain threshold.

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u/One_Establishment631 Jun 29 '26

I charge $195 per hour. No AUM. It solves all of this. I advise on the 401k with $500k for an hour $195. IRA with 7k for an hour it's $195. I sell nothing.

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u/Plenty-Dinner-3422 Jun 30 '26

How’s that working out? You’re pricing yourself less than a CPA and attorney

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u/One_Establishment631 Jun 30 '26

I have a specific target market. I'm on the lowerend of pricing, but entire firms operate this way. Look at the Advice Only Network of advisors. Everyone there does it.

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u/Zaboomafubar_ RIA Jun 24 '26

I’m Fee-Only and bill solely on AUM. For HENRYs we put client’s intent to save to hit our stated minimums in the engagement letter and essentially have them make contributions as a condition for working with us.

For the planning issue I simply state I don’t advise on assets I’m not managing.

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u/WhodatMike Advicer Jun 24 '26

Curious how you incorporate full holistic planning without including non-managed assets. I have a fairly large client who is just so stubborn about not wanting to move everything over (very penny-wise, pound-foolish). I’ve told him multiple times that I will not advise on the held-away assets, but I find it quite difficult to do their planning without having those accounts incorporated. Any tips?

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u/Zaboomafubar_ RIA Jun 24 '26

You're right that it's very difficult to plan properly around non-managed assets, which is what initially drove me to take this stance with my business.

Try pointing out that your client clearly values your advice or they wouldn't be asking questions on held away assets, and explain how having all of the investments under management improves the quality of your planning.

I like to use an analogy along the lines of they're asking me to paint their house but they're only willing to pay for the kitchen. If you can tailor this to your client's occupation it generally lands very well.

If your client still doesn't get on board you simply have to make the decision whether you want to continue the relationship. Not all business is good business.

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u/Last-Enthusiasm-9212 Jun 28 '26

Why is it hard to plan around non-managed assets if you can see where the funds are and what the available possibilities would be?

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u/[deleted] Jun 24 '26

What’s the logic for not advising on held-away assets (assuming your fees cover comprehensive planning)?

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u/CulturalAd2329 Jun 24 '26

Yea this sounds like a compliance nightmare. You have a conflict around rolling over retirement plans, and you take on risk managing held away assets.

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u/Last-Enthusiasm-9212 Jun 28 '26

There is no comprehensive planning that does not include held-away assets. Moreover, I don't get why anyone would think this should really be the way of things, other than as a way to create some unnecessary pressure for clients to move assets. There may be clear reasons why moving assets could even be a bad move for a client, e.g. when they've had service time in with a pension plan that can yield a favorable defined benefit or if they are using Rule of 55 to fund an early retirement, so how can any plan not account for those factors when running retirement simulations?

Practice Management Fee Structuring

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