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The majority of advisors still charge using an asset under management (AUM) fee schedule. It’s simple, familiar, and well-ingrained in the profession. But as markets evolve, and as technology and AI continue reshaping client expectations, it’s worth re-examining what the AUM model signals and where it falls short.
Benefits of AUM Pricing
There’s no denying the advantages. The advisor is financially incentivized to grow the portfolio, which aligns (at least partly) with investor goals. Clients are also comfortable with AUM; it’s straightforward and easy to calculate, even in tiered models.
Advisors benefit as well. Because markets tend to rise over time, their compensation (in dollars) often grows faster than inflation, even if the workload hasn’t changed much. That’s good for advisors, but not always viewed as fair by investors.
Challenges of AUM Pricing
And here’s where the cracks show. If the advisor is doing roughly the same work, is a doubling of fees over a decade justified simply because the market rose? Unless the advisor has expanded their services, many clients question the value.
That’s the key: value is always in the eye of the client. Under an AUM model, the very structure of the fee often signals to clients: “I’m paying you for performance.” Even if an advisor provides planning, coaching, and guidance, the way fees are calculated reinforces the performance perception and that creates tension when markets stumble.
Shaping Perception Through Your Fee Schedule
Advisors often present a tiered AUM schedule, but they rarely communicate how they want to be valued. Perception is shaped by framing. Instead of only showing a tiered rate, why not break out your blended fee into categories that reflect your true value?
For example, if you charge 1.00% AUM, you might allocate it as:
- 0.30% for financial planning and strategy
- 0.30% for accessibility and bandwidth
- 0.40% for coaching, behavioral guidance, and accountability
Notice what’s absent: trading and performance. This reframes the conversation and helps clients see your role in the right light as a guide, coach, and partner, not just a portfolio manager.
Why This Matters More Than Ever
In today’s environment, where algorithms and robo-advisors can handle the technical side of investing, human advisors must highlight what technology can’t replicate: empathy, guidance, influence, and behavioral coaching. A fee schedule that explicitly ties your compensation to these values not only justifies your fees; it makes them harder to commoditize.
If you want clients to perceive your value differently, show them, in writing, how you value yourself. Your fee schedule can be one of your most powerful tools to reframe perception and reinforce that you are the irreplaceable human advantage.
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