Changes in fees are coming for advisors. What will that look like?

Changes in fees are coming for advisors. What will that look like?
Tammy Robbins
The traditional asset-based fee advisors charge clients "is going by the wayside," one executive said.
JAN 28, 2025

Many in the broad financial advice industry expect fees advisors charge to clients for managing money and performing a variety of services to change in the next decade. But no one knows with any certainty where the potential variations in prices are heading.

Clients will continue to demand more in services from their financial advisors, resulting in a shift in pricing. That’s the financial advice industry’s broad consensus on pricing and fees at the moment.

The traditional fee by an advisor, to charge a client a percentage of assets to manage their portfolio and money, known in the industry as an asset-based fee, “is going by the wayside,” said Tammy Robbins, executive vice president, chief business development officer, Cambridge Investment Research.

Asset-based fees may be a portion of an advisor’s fee in the future, she said.

“It’s not going to be your traditional asset management” fee, Robbins said Tuesday morning in Dallas at the annual meeting of the Financial Services Institute, a trade association for independent broker-dealers. “It is going to be very different, so we have be open-minded in how financial professionals are consultative, and how they are a concierge type of service.”

Robbins spoke on a panel titled “How low will they go? Navigating price pressures.”

The fee advisors and firms in the future charge clients “may not be a percentage of assets,” Robbins said. “Personally, I don’t think it will be. It will be more like an a la carte menu of services, including financial planning, taxes, guidance on buying a car or home. We’re going to have to be open-minded.”

Financial advisors who work as independent contractors typically charge a client an annual fee in the neighborhood of 1 percent of a client’s assets. That would translate into an annual fee of $10,000 for a family with $1 million in assets.

Some firms are more expensive and others less, with advisors at large brokerage firms charging in a range of 80 basis points (0.8 percent) to 120 bps (1.2 percent) of assets to work with clients.

Broker-dealers charge clients commissions for transactions, but the retail brokerage industry has steadily shifted to asset-based fees over the past 20 years.

“We must think about net new clients, the next generation of client and how they want to be interacted with, and how they want to be serviced,” Robbins said. “We have to reinvent and think about how we are servicing that next generation of client, and then we are going to have to build our pricing around that.”

Financial advisors are currently enjoying a golden age of sorts. The broad stock market continues to trade near record highs, which means the fees that advisors charge clients also increase. And the marketplace for advisors to sell their firms, particularly RIAs that generate attractive rates of cash flow, has never been more robust.

While many broker-dealer executives don’t see the asset-based pricing model about to shift, others are concerned that a change in pricing will eventually hit and potentially erode the bottom lines of firms like broker-dealers and registered investment advisors that work with financial advisors.

Advisors charging clients other types of fees, such as a flat-fee model or a subscription-fee model, has been widely discussed in recent years but not overwhelmingly adopted.

The financial advice industry has been holding its breath for more than a decade about a potential erosion in the level of fees it charges clients. It need look no further than the adjacent mutual fund industry for proof of sudden fee erosion.

Actively managed mutual funds once dominated the asset management market for retail investors and financial advisors. Drastically cheaper, often passively managed, exchange-traded funds have eaten away at actively managed funds.

A key to stable pricing for broker-dealers and RIAs is the relationship between the advisor and the client and the firm adding services to cement that relationship, said Catherine Knopf, senior vice president of advisory sales at Osaic.

“In light of pricing in asset management, pricing compression is very real,” Knopf said. “On the advisory side, it’s less so real and that is very much do to the value proposition around it.”

Latest News

Finra's Reg BI Enforcement: Is it 'ineffective, costly'?
Finra's Reg BI Enforcement: Is it 'ineffective, costly'?

The industry watchdog's own reports reflect failures to deter "willful" and "repeat" violations, raising a crucial question about the future of regulation.

SEC prepares to back away from defending climate rule in court
SEC prepares to back away from defending climate rule in court

Acting Chairman Mark Uyeda directed SEC staff to initiate a pause in court while the commission awaits a quorum. The SEC may decide to withdraw from defending itself in a lawsuit over last year's climate disclosure rule.

wealth.com welcomes Kathy Wunderli in private wealth push
wealth.com welcomes Kathy Wunderli in private wealth push

The top estate planning platform's veteran hire will lead its legal team's efforts to develop estate planning, tax analysis, and wealth transfer solutions for ultra-high-net-worth clients.

Morgan Stanley loses $843,000 investor claim stemming from 'gold bar' scam
Morgan Stanley loses $843,000 investor claim stemming from 'gold bar' scam

“If Morgan Stanley had called my client’s son, this wouldn’t have happened,” the investor's attorney said.

LPL welcomes $630M sibling advisor duo from Corebridge
LPL welcomes $630M sibling advisor duo from Corebridge

Meanwhile, Ameriprise has bolstered its own ranks as an LPL defector joins its branch channel in California.

SPONSORED Taylor Matthews on what's behind Farther's rapid growth

From 'no clients' to reshaping wealth management, Farther blends tech and trust to deliver family-office experience at scale.

SPONSORED Why wealth advisors should care about the future of federal tax policy

Blue Vault features expert strategies to harness for maximum client advantage.