The 1% AUM fee appears to be receding, at least for high-net-worth clients, Cerulli Associates reports in a study released this week.
Most advisors in the research group's survey population are already charging less than 1% for clients with $1.5 million or more in investable assets.
Average fees have remained largely stable, the study notes, but signs of change are on the horizon. By 2026, 83% of financial advisors said they expect to charge less than 1% of assets under management for clients with more than $5 million in assets, the research group found in a survey. On average, advisors expect to charge 76 basis points at this asset level, down from 77 basis points in 2024.
The average fee expectations for 2026 are 66 basis points for clients with more than $10 million in assets, 92 basis points for those with $1.5 million and 106 basis points for those with $750,000, down one basis point each from 2024 levels.
The average fee for clients with $100,000 is expected to remain stable, at 125 basis points.
As more members of the next generation enter the client pool and affluent investors increasingly accumulate wealth, financial advisors must adapt and adjust their fee structures to cater to these potential clients, Cerulli said.
Cerulli surveyed more than 2,000 advisors across the wirehouse, bank, independent, regional, insurance and RIA channels.
Many younger potential clients are familiar with a variety of pricing models for the services they use in their daily lives, the study notes, and have come to expect similar options when they choose an advisor. Advisors, for their part, are adapting their pricing strategies accordingly.
Fees vs. Commissions
At present, 44% of advisors in a Cerulli survey said they derive at least 90% of their revenue from advisory fees. Cerulli expects that share of advisors to grow to 54% by 2026. Meanwhile, the percentage of advisors who charge a combination of fees and commissions is likely to drop from 12% to 2% over the next 24 months.
“Expectations for service and pricing structure differ vastly from those of previous generations,” Kevin Lyons, senior analyst at Cerulli, said in a statement. “Clients — particularly high-net-worth individuals — increasingly expect their advisors to provide more services beyond investment management.”
If an advisor’s practice offers more financial planning, estate planning and tax management services, it is more likely to attract clients with significant investable assets.
Cost continues to be a major consideration for clients shopping for an advisor. Cerulli says it is essential for advisors who want to attract high-net-worth clients to offer a wider range of services while also maintaining an attractive and competitive cost structure.
“The pressure to lower fees while simultaneously meeting clients’ growing demand for additional services creates a challenging environment for financial advisors,” Lyons said. “Advisors who can clearly define their processes, remain flexible in their fee structures and adapt to offer a broader range of services will be better positioned to distinguish themselves from their peers and attract the types of clients they desire.”
— Katie Rass contributed to this report.
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