A flat fee costs less than a percentage of assets once the investments an advisor manages for you pass about $450,000. That’s where the median flat ongoing fee at US fee-only firms, $4,500 a year, meets the median rate of 1%. Below that line a percentage usually costs less. Above it the flat fee wins every year, and the gap grows with your balance. The catch is that the two prices often buy different work, so compare what’s included before you compare the numbers.
The two side by side
| Flat fee | Percentage of assets | |
|---|---|---|
| What sets the price | How complex your situation is | The value of the investments the advisor manages |
| Typical price (US median) | $4,500 a year, middle half $2,400 to $7,200 | 1% a year on the first tier, middle half 0.95% to 1% |
| When markets rise | Same price | You pay more |
| When markets fall | Same price | You pay less |
| Managing your investments | Sometimes included; ask | Almost always included |
| How it’s usually paid | Billed to you, monthly or quarterly | Deducted from your account, usually quarterly |
| What the advisor gains from a bigger balance | Nothing | A bigger fee |
Most fee-only firms offer more than one option, so you can often get both quotes from the same firm.
Share of firms whose websites say how they charge
Source: Wellspent fee report
What each costs at your balance
Yearly cost by balance. Past the crossing point, the percentage fee costs more every year.
Source: Wellspent fee report
Data
| Assets | 1% of assets | $4,500 flat fee |
|---|---|---|
| $0 | $0 | $4,500 |
| $50K | $500 | $4,500 |
| $100K | $1,000 | $4,500 |
| $150K | $1,500 | $4,500 |
| $200K | $2,000 | $4,500 |
| $250K | $2,500 | $4,500 |
| $300K | $3,000 | $4,500 |
| $350K | $3,500 | $4,500 |
| $400K | $4,000 | $4,500 |
| $450K | $4,500 | $4,500 |
| $500K | $5,000 | $4,500 |
| $550K | $5,500 | $4,500 |
| $600K | $6,000 | $4,500 |
| $650K | $6,500 | $4,500 |
| $700K | $7,000 | $4,500 |
| $750K | $7,500 | $4,500 |
| $800K | $8,000 | $4,500 |
| $850K | $8,500 | $4,500 |
| $900K | $9,000 | $4,500 |
| $950K | $9,500 | $4,500 |
| $1M | $10,000 | $4,500 |
| $1.1M | $10,500 | $4,500 |
| $1.1M | $11,000 | $4,500 |
| $1.1M | $11,500 | $4,500 |
| $1.2M | $12,000 | $4,500 |
| $1.3M | $12,500 | $4,500 |
| $1.3M | $13,000 | $4,500 |
| $1.4M | $13,500 | $4,500 |
| $1.4M | $14,000 | $4,500 |
| $1.4M | $14,500 | $4,500 |
| $1.5M | $15,000 | $4,500 |
| $1.6M | $15,500 | $4,500 |
| $1.6M | $16,000 | $4,500 |
| $1.6M | $16,500 | $4,500 |
| $1.7M | $17,000 | $4,500 |
| $1.8M | $17,500 | $4,500 |
| $1.8M | $18,000 | $4,500 |
| $1.9M | $18,500 | $4,500 |
| $1.9M | $19,000 | $4,500 |
| $1.9M | $19,500 | $4,500 |
| $2M | $20,000 | $4,500 |
| $2M | $20,500 | $4,500 |
| $2.1M | $21,000 | $4,500 |
| $2.1M | $21,500 | $4,500 |
| $2.2M | $22,000 | $4,500 |
| $2.3M | $22,500 | $4,500 |
| $2.3M | $23,000 | $4,500 |
| $2.4M | $23,500 | $4,500 |
| $2.4M | $24,000 | $4,500 |
| $2.5M | $24,500 | $4,500 |
| $2.5M | $25,000 | $4,500 |
| $2.5M | $25,500 | $4,500 |
| $2.6M | $26,000 | $4,500 |
| $2.6M | $26,500 | $4,500 |
| $2.7M | $27,000 | $4,500 |
| $2.8M | $27,500 | $4,500 |
| $2.8M | $28,000 | $4,500 |
| $2.9M | $28,500 | $4,500 |
| $2.9M | $29,000 | $4,500 |
| $3M | $29,500 | $4,500 |
| $3M | $30,000 | $4,500 |
In dollars, 1% is $2,500 a year on $250,000, $10,000 on $1 million and $20,000 on $2 million. The flat fee stays where it is. What those gaps add up to over 10 and 20 years is worked out for $500K, $1M and $2M.
The median is a starting point, not your price. Flat fees rise with complexity and vary a lot by state (see what flat-fee advisors charge), and many percentage firms charge less above $1 million (see whether 1% is too much). To find your own crossing point, divide the flat quote by the percentage quote. A $6,000 flat quote against 1% crosses at $600,000. Against 0.8%, it crosses at $750,000.
Compare the same work
A percentage fee nearly always pays for someone to run your investments: choosing funds, rebalancing, harvesting losses for tax, setting up withdrawals. A flat fee may or may not. Some flat-fee firms manage your accounts for the same price. Others advise and leave the trading to you, and some add a small percentage for management on top.
So before you compare, ask each firm one question: “Does this price include managing my investments?” If the flat quote doesn’t and you’d want that help, the fair comparison is the flat fee plus whatever management would cost you, or the flat fee plus your own time. Our guide to advice-only vs full-service planners covers that choice.
When a flat fee is the better choice
- Your managed balance is above your crossing point and the flat price covers the same work.
- Much of your money sits where an advisor can’t manage it. A 401(k) you keep at work, a pension, home equity or a business. A percentage advisor is paid on the part they manage, so the rest can get less attention, or you may be asked to move it. A flat fee pays for advice on everything.
- You’re weighing a decision that takes money out of your accounts. Paying off a mortgage, buying an annuity, putting money into a business or giving to family all shrink the balance a percentage is charged on. The SEC suggests firms with asset-based fees tell clients they may have an incentive to encourage you to increase the assets in your account. A flat-fee advisor earns the same either way.
- You want a bill you can plan around. You know the cost in January.
When a percentage of assets is the better choice
- Your balance is below your crossing point and you want your investments managed. At $200,000, 1% is $2,000 a year, well under the median flat fee.
- You want someone else to handle all the investing, including withdrawals in retirement, and the flat-fee firms you’ve found don’t.
- You’d like the fee to fall when markets do. In a bad year a percentage fee shrinks with your balance. A flat fee becomes a larger share of a smaller portfolio.
- You’d rather not pay from your checking account. The fee comes out of the account it’s charged on. That’s convenient, though it also makes the cost easy to stop noticing.
The pull each puts on an advisor
No fee model is free of incentives, but they point in different directions. A percentage pays the advisor more when your managed balance grows, from markets or from you moving more money over. A flat fee removes that pull but sets a fixed budget of the advisor’s time, so the question becomes how much attention the price buys. Ask how many meetings a year are included, how fast emails get answered, and what would make the price go up.
Either way, a fee-only advisor is paid only by you, not by the companies whose products they recommend. That matters more than which of these two models you pick.
Questions to ask before you choose
- What would I pay this year, in dollars, under each fee option you offer?
- Does the flat price include managing my investments? If not, what does management cost?
- Which of my accounts would the percentage apply to?
- Do you lower the rate at higher balances? What would my blended rate be?
- When would a flat price change, and how much notice would I get?
- Do you or your firm earn anything other than what I pay you?
Check the answers against the firm’s brochure. Item 5 of every registered firm’s Form ADV Part 2A sets out its fee schedule, how fees are billed and whether they’re negotiable, and it’s free on the SEC’s adviser search. If you’re already paying a percentage and want to ask for a flat quote, our guide to negotiating advisor fees shows how.
Run your own balance through the fee calculator, read the glossary entries for a flat fee, an AUM fee, a breakpoint and a conflict of interest, or browse flat-fee advisors and the flat-fee planning specialty in the public graph.