Comparing fee structures — and the traps in each.

Fee-only AUM-based

The advisor charges a percentage of assets under management. No commissions. No product revenue. Compensation moves only with the size of your portfolio.

Best for: Most HNW clients with $1M+ in investable assets. The structural alignment is the cleanest available.

Watch for: Hidden share-class costs (the 1% advisory fee gets ugly if the underlying funds are A-share or C-share retail classes with 1-2% expense ratios). Always ask about institutional share-class implementation.

Fee-only flat or hourly

Some firms charge a flat annual retainer or hourly project fees rather than AUM-based fees. More common for limited-scope engagements (planning-only without ongoing investment management) or for very high net worth clients where AUM-based fees would be disproportionate.

Best for: Specific planning projects, second-opinion work, ultra-high-net-worth where AUM fees become unwieldy.

Watch for: Scope creep that turns a flat fee into an ongoing relationship without an ongoing fee structure. Define the scope carefully.

Fee-based

A hybrid structure — the firm charges fees AND collects commissions or product revenue. Sounds similar to "fee-only" but is structurally different. This is where most of the conflict-of-interest gotchas in the industry live.

Best for: Honestly, it's rarely the best for a sophisticated HNW client. The structural conflict is real even when individual advisers are ethical.

Watch for: The "fee-only" vs. "fee-based" language confusion. The two are often deliberately conflated in marketing. Ask directly.

Commission-based

No advisory fee; the firm is compensated by the commissions and product revenue from the financial products you buy. Common at insurance-affiliated broker-dealers and traditional retail brokerages.

Best for: Smaller relationships where the alternative would be no advice at all. Increasingly rare in the HNW market.

Watch for: Structurally, the highest conflict-of-interest model. Recommendations that look unconvincingly product-driven, frequent trading, "rebalancing" that mostly produces transaction revenue.

Hidden fee traps across all structures

• Tiered AUM breakpoints that never trigger. "1.0% with a break to 0.75% above $5M" sounds good until you realize your accounts are titled separately so no single account reaches $5M.
• Wrap fees layered on advisory fees. Some platforms charge an advisory fee on top of a wrap fee that already includes investment management.
• Proprietary product steering. "Fee-only" firms that primarily recommend their own in-house funds. Technically legal with disclosure; structurally a conflict.
• Soft-dollar arrangements. Required to be disclosed in Form ADV; many investors don't know to look.

Benchmark fee pricing

For HNW clients ($1M-$10M), the reasonable all-in cost range from a fee-only RIA is 0.75-1.25%. The lower end reflects larger portfolios with simpler implementations; the upper end reflects more complex situations requiring more coordination. Costs above 1.5% all-in deserve interrogation. Costs above 2% all-in are very difficult to justify.

See also Understanding All-In Fees for the full cost-component breakdown.