AUM, flat, hourly, retainer: advisor fee structures explained
TL;DR. Fee-only fiduciary advisors use four main compensation models: AUM (Assets Under Management), flat annual retainer, hourly, and project fee. AUM is the most common (0.50%–1.25% of assets per year). Flat retainer is growing among comprehensive-planning firms ($2,500–$10,000/year). Hourly fits DIY investors ($200–$500/hour). Project fees suit one-time plans ($1,500–$5,000). Each model creates different alignments and conflicts — and the best fit depends on your assets, complexity, and how much ongoing contact you want.
AUM — Assets Under Management
How it works
The advisor charges a percentage of the assets they manage for you, billed quarterly from the account.
Typical range: 0.50% to 1.25% per year. Many firms tier the rate: 1.00% on the first $1M, 0.80% on the next $2M, 0.60% above $3M.
Where it fits
- Clients with $500K+ who want integrated investment management and planning in one package.
- Households who prefer "fire and forget" — they don't want to think about advisor billing between quarters.
- Relationships where the advisor is actually implementing investment decisions, not just advising.
Pros
- Revenue alignment. The advisor earns more when your portfolio grows and less when it shrinks. That's an incentive to protect the downside.
- Predictable cost. You know quarter by quarter what you'll be charged.
- Service bundled. Most AUM firms include financial planning, tax coordination, and quarterly reviews in the fee.
Cons
- Expensive at scale. A 1% AUM fee on $3M is $30,000/year — often more than a flat retainer would be for the same service.
- Conflict on "should I move my 401k here." AUM advisors earn more when more assets are under their roof. That's a conflict around whether to consolidate.
- Conflict on "should I pay off my mortgage." Paying down a mortgage means less AUM for the advisor.
- Same fee in good and bad markets. In a 40% drawdown year, your portfolio and the advisor's effort don't move together.
When to choose it
Portfolio $500K–$3M, looking for full-service management and planning in one package, minimal real estate or business equity to coordinate.
Flat annual retainer
How it works
The advisor charges a fixed annual fee, independent of assets. Fee is usually paid quarterly or monthly.
Typical range: $2,500 to $10,000 per year for individuals and couples. $10,000 to $50,000+ for business-owner or family-office-style engagements.
Where it fits
- Clients whose complexity is not proportional to their investable assets — business owners, equity-comp professionals, people with real estate portfolios.
- Clients who don't want their cost to scale with the portfolio.
- Households that keep most of their wealth in places the advisor can't directly manage (401(k), real estate, business equity) but still need planning.
Pros
- Cost transparency. You know the annual number going in.
- No AUM conflict. Advisor has no incentive to push consolidation or discourage mortgage payoff.
- Stable in down markets. Your fee doesn't change when the portfolio dips.
- Focus on planning, not portfolio. The model tends to produce advisors whose work is genuinely comprehensive.
Cons
- Not common under $400K. At that level, a flat retainer works out to 1.5%+ as a percentage of assets — most clients find that feels expensive.
- Can feel high in a good year. If the portfolio is up 20% and the fee didn't move, the math feels "flat" even though the advisor is doing the same work.
- Requires clarity on scope. Flat retainers work when both parties know what's included.
When to choose it
Net worth is spread across retirement accounts, real estate, business equity, and investable assets. You want planning more than you want a portfolio manager.
Hourly
How it works
The advisor bills time at an hourly rate, like a lawyer or accountant.
Typical range: $200 to $500 per hour, with some senior advisors at $600+.
Where it fits
- Do-it-yourself investors who want a professional second opinion.
- Clients with one-off questions (retirement review, inheritance decision, home-sale tax planning).
- Smaller portfolios where AUM math doesn't work.
Pros
- Pay only for what you use. No ongoing commitment.
- Specialty project work. Perfect for discrete deliverables like a one-time retirement plan.
- Great trial run. You can hire hourly, see how the advisor thinks, and decide later whether to move to an ongoing relationship.
- Fits younger clients. The Garrett Planning Network built a nationwide hourly fee-only network specifically for this demographic.
Cons
- Uneven annual cost. Some years you'll engage 5 hours, some years 20.
- No ongoing monitoring. The advisor isn't watching your portfolio between engagements.
- Can get expensive for complex cases. If a situation keeps generating questions, the hours add up.
When to choose it
You want a second opinion on a specific question, you manage your own portfolio, or your assets are too small for AUM math to work.
Project / flat-fee planning
How it works
The advisor delivers a specific deliverable — a written financial plan, a retirement drawdown strategy, a tax plan — for a fixed, quoted price.
Typical range: $1,500 to $5,000 per plan.
Where it fits
- Clients who want one-time planning and will implement it themselves.
- People interviewing advisors who want to see how a specific advisor thinks before committing to an ongoing relationship.
- Complex one-off events (inheritance, business sale, divorce) that need a focused plan.
Pros
- Finite, transparent, contained. You know what you're buying and what it costs.
- Great trial. If the advisor is good, you can move to ongoing work. If not, you've spent a bounded amount.
- Lower cost of entry. Usually cheaper than a first year of AUM or flat retainer.
Cons
- One-time. No ongoing portfolio management or monitoring.
- Implementation is on you. Unless you re-engage, you execute the plan yourself.
When to choose it
You want a written plan, a specific strategy on one question, or a controlled way to test-drive an advisor.
The hybrid "subscription" model
How it works
Growing among firms serving younger professionals — a flat monthly fee ($100–$400/month) for ongoing access to the advisor, sometimes with an initial onboarding fee.
Where it fits
30–45-year-old professionals building wealth who want ongoing coaching but don't have enough investable assets to fit AUM math.
Pros
- Ongoing relationship at a flat cost.
- Matches the monthly-bill model most professionals are used to.
- Works well for equity-comp professionals who have income but not yet large portfolios.
Cons
- Newer model — less standardization across firms.
- Subscription fatigue; the cost can feel high month after month when a big decision isn't happening.
Side-by-side
| Model | Typical cost | Best fit | Key risk |
|---|---|---|---|
| AUM | 0.50%–1.25%/yr | $500K–$3M, wants one-stop investment + planning | Conflict on consolidation & debt payoff |
| Flat retainer | $2.5K–$10K/yr | Net worth across multiple buckets | Can feel high in good markets |
| Hourly | $200–$500/hr | DIY investor, specific question | No ongoing monitoring |
| Project | $1.5K–$5K | One-time plan, test-drive | Implementation is on you |
| Subscription | $100–$400/mo | 30–45-year-old professional | Less standardization |
What to match against your situation
- Under $250K, DIY-minded: hourly or project.
- $250K–$500K, want ongoing help: flat retainer or subscription.
- $500K–$3M, want full-service: AUM, or flat retainer if portfolio is fragmented.
- $3M+: tiered AUM that drops the effective rate, or flat retainer.
- One-time event (inheritance, business sale): project.
- Interviewing advisors: project or hourly to test the relationship.
Key takeaways
- Four main fee-only models: AUM, flat retainer, hourly, project.
- AUM is most common; flat retainer is growing.
- Hourly works best for DIY investors; project for one-time plans.
- Each model has specific conflicts. None are free of them.
- Match the model to your assets, complexity, and preferred contact frequency.
Sources
- Garrett Planning Network — garrettplanningnetwork.com.
- Kitces Research, "Shifting Business Model of Financial Advisors," annual.
- CFP Board studies on planner compensation.
- Form ADV Part 2A Item 5.
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