When you’re evaluating wealth management firms, the fee structure is more than a line item—it shapes the relationship, the services you receive, and the incentives driving your advisor.
Two common models dominate the industry: Assets Under Management (AUM) and flat-fee pricing. Both have pros and cons and understanding them can help you make an informed decision.
What Is an AUM Fee Model?
An AUM model charges a percentage of the assets you invest with your advisor. For example, if you invest $5 million and the fee is 0.50%, your annual fee would be $25,000. But the real story isn’t just about math—it’s about alignment and unbiased advice.
AUM is often considered the independent advice model because it ties your advisor’s success to yours. Firms using this structure typically operate as fiduciaries, meaning they are legally and ethically obligated to act in your best interest.
Unlike broker-dealers who may earn commissions on products they sell, fiduciary firms under an AUM model are paid only by you. No kickbacks. No hidden incentives. Just advice designed to serve your goals.
This alignment creates a partnership: when your wealth grows, your advisor benefits; when markets dip, they share in that impact. It encourages a long-term, proactive relationship rather than a transactional one.
Flat-Fee Models—and How They Compare to AUM
Flat-fee pricing is a fixed annual or monthly fee for services, regardless of portfolio size. Advocates argue it’s predictable and avoids “penalizing” growth. For some clients, that predictability feels comforting.
But flat-fee models often remain surface-level when your specific situation may be more complex and benefit from a deeper dive. Because revenue is fixed, some flat-fee firms limit scope to keep costs predictable.
That can mean less comprehensive planning, fewer proactive touches, and a narrower view of your financial life. While not inherently “bad,” it can lead to advice that’s valuable on the surface but uninformed about the full complexity of your situation.
By contrast, AUM firms often include a broader range of services—tax strategy, estate planning, insurance analysis, and multi-generational planning—without hourly billing or “add-on” charges. For families with complex financial lives, that difference matters.
Pros and Cons at a Glance
- Flat Fee Pros: Predictable costs; may be cost-effective for very large portfolios.
- Flat Fee Cons: Limited scope; potential for transactional relationships; extras may cost more.
- AUM Pros: Incentives align with your success; typically includes comprehensive planning; fosters long-term partnership.
- AUM Cons: Fees rise with portfolio growth; may feel less predictable if markets fluctuate.
The Case for AUM: Why It Creates Better Outcomes
For families with complex financial lives, AUM often creates a more holistic experience. Here’s why:
1. No Billable Hours Traps
Flat-fee firms often rely on hourly billing for “extras.” Need a tax projection? Estate planning review? Suddenly, you’re watching the clock.
With AUM, there’s no nickel-and-diming. Clients can call their advisor as needed—whether it’s a quick question or a major life decision—without worrying about surprise invoices.
That freedom fosters trust and better decision-making.
2. A Relationship Built for the Long Term
Wealth management isn’t a one-and-done transaction. It’s a journey that evolves as your life does—career changes, liquidity events, family transitions.
An AUM model incentivizes your advisor to stay deeply engaged, because your success is their success. They're not just managing investments; they’re aligning your wealth with your goals and values through ongoing planning.
3. Comprehensive Services Included
Flat-fee models often focus narrowly on investment management. But real wealth management is holistic.
A firm who operates under an AUM model typically covers everything from tax strategy and estate planning to insurance analysis and multi-generational planning. These aren’t “add-ons”—they’re essential pieces of your financial life. Ignoring them can cost far more than any fee.
But What About Cost?
It’s fair to ask: “Won’t AUM cost more as my portfolio grows?”
Possibly—but consider what you’re getting. AUM fees scale because complexity scales. Managing $10 million isn’t the same as managing $1 million. More assets mean more opportunities—and more risks.
Which Model Fits Your Vision?
If you’re looking for a purely transactional relationship, a flat fee might suffice. But if you want a partner who understands your vision, anticipates your needs, and delivers comprehensive planning without limits, AUM is hard to beat.
It’s not just about managing money—it’s about creating absolute wealth alignment, where your wealth fully supports the life you want to live.
Ready to Explore What Plancorp's AUM Model Can Do for You?
At Plancorp, we’ve spent more than 40 years refining a process that goes beyond basic advice. Our fiduciary, fee-only model means no commissions, no kickbacks—just transparent pricing and comprehensive planning.
Schedule a 30-minute call with a wealth advisor today and see how our approach can help you achieve confidence for life’s journey.
