Are financial advisor fees negotiable?

Many financial advisor fees are negotiable, and you don’t have to guess which: the SEC’s instructions for Form ADV Part 2A, Item 5 tell every registered firm to provide its fee schedule and “disclose whether the fees are negotiable.” What’s realistic depends on how the advisor charges. On a percentage of assets, expect a breakpoint or a tier, not a cut from 1% to 0.5%. On a flat or subscription fee, the room is usually in the scope of work.

Start with the brochure

Every registered investment adviser files a brochure, Form ADV Part 2A, and must give it to you before or at the time you sign an advisory agreement. Item 5 is the fees section. It has to cover:

• The fee schedule, and whether the fees are negotiable
• How you pay: deducted from your accounts or billed to you, and how often
• Other costs you’ll pay on top, such as custodian fees and fund expenses
• Prepaid fees: whether you pay in advance, and how you get a refund if you leave mid-period

Look the firm up on the SEC’s free adviser search and open the brochure before your first call. If Item 5 says “fees are negotiable,” you know the schedule is a starting point. If it says fees are not negotiable, asking for a discount probably won’t work, but asking which tier or package fits you still can.

What’s realistic, by fee type

The spreads tell you where the room is.

Percentage of assets. First-tier rates barely vary: the middle half of fee-only firms charge 0.95% to 1%. Asking for half the standard rate on $1 million is unlikely to go anywhere at a firm that does real planning. The realistic asks are smaller and worth real money: a tenth of a percentage point is $1,000 a year on $1 million, every year. In practice the room is in:

• Breakpoints. Many firms charge less on the portion above $1 million or $2 million. Ask for the schedule and your blended rate.
• Household counting. Ask whether your spouse’s accounts, IRAs and a trust all count toward the breakpoint. Counting the household can move you into a lower tier.
• A move to the next tier. Some advisors will apply the next tier’s rate to a client just under it.

Flat and subscription fees. These spread much more widely, from $2,400 to $7,200 a year in the middle half. That spread is mostly about complexity and scope, not haggling. The realistic asks are about what you pay for: fewer meetings, planning without investment management, or a lower tier if your situation is simpler than the firm assumed. Comparing firms usually saves more than negotiating with one. See what flat-fee advisors charge and what subscription planning costs.

One-time plans and hourly. Hourly rates cluster tightly, $250 to $350 for the middle half, so the lever is hours, not the rate: ask for an estimate and a cap. A one-time plan’s price follows its scope. Narrow the question and the price usually comes down. Our guides to hourly planners and one-time plans cover what each includes.

How advisors see it

Advisors are split on fee negotiation, and it helps to know why. Some won’t move at all, on the view that every client in a tier should pay the same. Others negotiate within limits. Three advisors on r/CFP described their approach (thread); each is one advisor’s experience:

• One bumps a prospect who presses into a higher tier: “I may offer to bump them into the next tier which is usually shaving off 10 bps or so.” (10 basis points is a tenth of a percentage point.)
• Another offers temporary discounts only: “We do not, however, permanently lower our fee.”
• A third ties it to referrals: “I usually only adjust my fees when a client sends me a great referral.”

The pattern is useful. Advisors who negotiate tend to do it through the structure of the schedule, so ask about structure.

Get it in writing, then check the bill

A discount only helps if it’s applied. In a 2018 risk alert drawn from more than 1,500 exams, SEC examination staff listed fee problems they found most often. They included advisers that didn’t combine accounts of the same household when that would have earned a discount, didn’t apply a breakpoint a client had reached, and charged a higher rate than the advisory agreement. The same alert cites a 2017 settled SEC order against Morgan Stanley Smith Barney for charging advisory fees that didn’t reflect negotiated discounts.

So:

1. Put the agreed rate, the breakpoints and any discount, with its end date, in the advisory agreement.
2. List the accounts that count toward your breakpoints.
3. Check your first two or three invoices or statements against the agreement.

How to ask

You don’t need a script, but this order works:

1. Ask for the total yearly cost in dollars for your situation, not a rate.
2. Ask what’s included, so you’re comparing the same service across firms.
3. Ask the brochure question: “Your Form ADV says your fees are negotiable. What does that usually mean for a household like mine?”
4. Bring a comparison. “Another fee-only firm quoted me a flat $4,500 a year for planning” is more useful than “can you do better.”

What not to trade away

A lower fee from an advisor who also earns commissions can cost more than a higher fee from one who doesn’t. Sales charges and fund fees that pay the advisor don’t show up on the invoice. With a fee-only advisor, the fee you agree is the whole cost of the advice. Our guide to telling whether an advisor is fee-only shows how to check, and is a 1% fee too much covers what you should get for a percentage fee.