How much does a financial advisor cost in 2026? Flat-fee vs AUM explained
By Novak Financial Partners · Updated April 2026
Key takeaways
- The three most common ways advisors charge ongoing clients: AUM, flat fee, and commissions
- AUM advisors charge around 1% of your portfolio per year. On $500,000 that is $5,000/year. On $1,000,000 it is $10,000/year
- Flat-fee advisors charge a fixed annual amount regardless of portfolio size, typically $2,500 to $9,000/year
- Commission-based advisors are compensated by third parties when they sell certain products. The cost is not always visible as a direct fee
- Key questions to ask any advisor: Are you a fiduciary? Are you fee-only? What is included in the fee?
- Many AUM firms require $250,000 to $1,000,000 in investable assets just to become a client. Flat-fee firms typically have no minimum
Financial advisor fees are not always easy to find. With AUM advisors, the fee comes out of the portfolio automatically. It does not show up as a separate line item on most statements and does not require a check to be written. With commission-based advisors, the cost is embedded in the products themselves. That can make it easy to lose track of what you are actually paying.
This article breaks down the three main ways financial advisors charge ongoing clients, how each model works, and what to consider when evaluating which structure fits your situation.
The three main ways financial advisors charge
AUM (assets under management). A percentage of your investment portfolio charged annually. The industry standard is around 1%, though some advisors charge a bit more and some a bit less, and fees often decrease on a tiered basis as portfolio size increases. This is the most common model. Many AUM firms have investment minimums, commonly $250,000 to $1,000,000 in investable assets, before they will take on a new client.
Flat fee / retainer. A fixed annual amount for ongoing comprehensive planning and investment management. Does not change as your portfolio grows. Typical cost is $2,500 to $9,200 per year. This model is gaining in popularity, particularly among people who do not meet the minimums of traditional AUM firms and among clients with larger portfolios who prefer a predictable, fixed cost.
Commissions. Some advisors earn compensation from third parties when they sell certain financial products, such as annuities, life insurance policies, or load mutual funds. The commission is paid by the product provider, not directly by you. Advisors who earn commissions are sometimes called commission-based or fee-based advisors. This compensation structure creates a potential conflict of interest, since the advisor may have a financial incentive to recommend products that pay a commission. It is worth asking any advisor whether they earn commissions, and on what types of products.
What 1% actually costs at different portfolio sizes
The percentage sounds small. The dollar amount at larger portfolio sizes is worth knowing. Because AUM fees are typically deducted automatically from the account, it helps to calculate the actual dollar figure rather than just the percentage.
| Portfolio size | 1% AUM fee/year | Flat fee/year | Annual savings |
|---|---|---|---|
| $250,000 | $2,500 | $4,000 to $6,000 | AUM may be cheaper here |
| $500,000 | $5,000 | $4,000 to $6,000 | Roughly breakeven |
| $750,000 | $7,500 | $4,000 to $6,000 | $1,500 to $3,500/year |
| $1,000,000 | $10,000 | $4,000 to $6,000 | $4,000 to $6,000/year |
| $2,000,000 | $20,000+ | $4,000 to $6,000 | $14,000 to $16,000/year |
Flat-fee range reflects Novak Financial Partners pricing. AUM fee based on the 1% industry median. Individual advisor fees vary.
The crossover point is around $500,000. Below that, an AUM fee is often lower than a flat-fee arrangement. Above it, the dollar difference between the two models widens. The right answer depends on what services are included, what minimum your situation meets, and which structure fits how you prefer to work with an advisor.
One more thing the table does not show: investment minimums
Many AUM firms require $250,000 to $1,000,000 in investable assets just to become a client. A high-earning professional in their 30s with $150,000 saved and significant income growth ahead may not qualify for an AUM firm at all, despite being exactly the person who would benefit most from comprehensive planning. Most flat-fee firms have no asset minimum, which means you can access the same quality of advice earlier, when the planning decisions arguably matter most.
Fees and compounding: what to keep in mind
Any advisory fee, whether AUM or flat, reduces the dollars available to stay invested and compound over time. This is true of all fees, not just one model. The practical question is how much you are paying in total dollar terms each year, and whether the services and advice you receive are worth that cost to you.
Because AUM fees are percentage-based, the dollar amount grows as your portfolio grows. A flat fee stays fixed regardless of portfolio growth. Both are legitimate ways to pay for advice. Understanding the dollar amount, not just the percentage, is the most useful place to start.
Fee-only vs fee-based: a distinction that matters
These terms sound similar. They are meaningfully different.
Fee-only
Paid exclusively by you. No commissions from financial products. Legally required to act in your best interest as a fiduciary. Fewest conflicts of interest. This is the model Novak Financial Partners uses.
Fee-based
Charges a fee but may also earn commissions on products they recommend. The commission creates a potential conflict of interest. May still be a fiduciary in some situations but not always. Ask explicitly.
Before hiring any advisor, it is worth asking two questions directly: Are you a fiduciary at all times? And are you fee-only? The answers will tell you a lot about how they are compensated and where their obligations lie.
Which fee model makes sense for you
There is no universal answer. A few factors tend to drive the decision.
- AUMis the most widely available model and works well for clients who meet the firm's investment minimum and want a fully managed relationship
- Flat feeis a fit for clients who do not meet the minimums of traditional AUM firms, and for clients with larger portfolios who want a predictable annual cost that does not change with portfolio growth
- Commissionsare common in product-focused relationships such as insurance or annuities. The cost is not always visible upfront, so it is worth asking how the advisor is compensated before engaging
The most important thing is that you understand exactly what you are paying and what you are getting in return, regardless of which model you use.
Five questions to ask before hiring any financial advisor
A good advisor will answer all five directly. If you get a vague or deflecting answer on any of them, that is worth paying attention to.
Frequently asked questions
How much does a financial advisor cost in 2026?
The three main models for ongoing client relationships are AUM, flat fee, and commissions. AUM advisors charge around 1% of your portfolio per year. Flat-fee advisors charge $2,500 to $9,000 annually. Commission-based advisors are compensated by third parties when they sell certain products. What you pay depends on the model, the firm, and the scope of services included.
Is a 1% AUM fee worth it?
It depends on what you get for it and how large your portfolio is. For smaller portfolios under $400,000, 1% can be reasonable for comprehensive services. For larger portfolios, 1% often exceeds what a flat-fee advisor would charge for the same work. The more important question is what services are included, whether the advisor is a fiduciary, and whether the fee is transparent.
What is the difference between fee-only and fee-based?
Fee-only advisors are paid exclusively by you and earn no commissions. Fee-based advisors charge fees but may also earn commissions on products they recommend, which creates potential conflicts of interest. Fee-only advisors are generally considered the more transparent option and are more likely to be true fiduciaries.
What is a fiduciary financial advisor?
A fiduciary is legally and ethically required to act in your best interest at all times. Registered Investment Advisors are fiduciaries. Broker-dealers operate under a lower suitability standard. Always ask whether your advisor is a fiduciary before you hire them, and ask that they confirm it in writing.
Are financial advisor fees tax deductible?
No. The Tax Cuts and Jobs Act of 2017 eliminated the deduction for investment advisory fees paid on taxable accounts. They are not currently deductible for individuals. This is one more reason to pay attention to the fee amount, since you are paying it entirely with after-tax dollars.
How do advisory fees affect my portfolio over time?
Any fee reduces the dollars available to stay invested and compound over time. This applies to all fee models, not just AUM. Because AUM fees are percentage-based, the dollar amount increases as your portfolio grows. A flat fee stays fixed. Understanding what you pay in actual dollar terms each year, not just as a percentage, helps you evaluate whether the cost is appropriate for the services you receive.
Do financial advisors have investment minimums?
Many do, and this is something most comparison articles do not address. AUM firms commonly require $250,000 to $1,000,000 in investable assets before they will take you on as a client. Flat-fee advisors typically have no asset minimum. You pay for the planning, not the portfolio size.
How is flat-fee planning different from what most advisors offer?
Most advisors charge a percentage of your portfolio that increases automatically as your wealth grows. Flat-fee planning charges a fixed annual amount regardless of portfolio size. The services are the same or broader. The cost is predictable. And as your portfolio grows, the flat-fee model becomes increasingly cost-effective compared to AUM. It also removes the conflict of interest that comes from an advisor earning more when they recommend holding more assets under their management.
Do commission-based advisors cost me anything directly?
Not as a direct fee. Commission-based advisors are paid by the product provider, so you will not receive an invoice or see a line item deducted from your account. However, the commission is built into the cost of the product itself, whether through higher expense ratios, surrender charges, or insurance premiums. The cost is real. It is just less visible than a direct fee.
What is the difference between a commission-based and a fee-only advisor?
A fee-only advisor is paid exclusively by you through a direct fee, whether AUM, flat, or hourly. They earn nothing from the products they recommend, which removes the financial incentive to favor one product over another. A commission-based advisor earns compensation from third parties when they place clients into certain products. Both can provide valuable advice, but the compensation structure is different, and it is worth understanding how your advisor is paid before you engage.
Want to learn more about flat-fee financial planning?
We have a 30-minute intro call to help you understand whether flat-fee planning might be a good fit for your situation. No obligation.
See if flat-fee planning is right for youThis article is for educational and informational purposes only and does not constitute personalized investment, tax, or financial planning advice. Fee ranges and comparisons are based on publicly available industry data and are provided for illustrative purposes only. Individual advisor fees vary based on services, firm, portfolio size, and other factors. Novak Financial Partners pricing shown is current as of publication and subject to change. Consult a qualified financial professional before making any advisory engagement decisions. Advisory services are offered through Core Planning LLC, a Registered Investment Advisor. For additional disclosures please visit corepln.com/disclosures.
