AUM-based pricing is coming under fresh scrutiny as generative AI makes basic investing and planning tasks cheaper and easier for both advisers and clients.
92% of advisers still use the assets-under-management model, with an average fee of 0.96%—about $960 annually per $100,000—yet Kitces says only 59% of that typically pays for investment management.
Advisers argue the fee now hinges less on fund picking than on tax planning, withdrawal strategy and behavioral coaching; Vanguard estimates skilled advice can add about 3% a year, including up to 1.5% from coaching.
Pressure on pricing is growing: investors told Morningstar they would pay $102 an hour for a solo adviser but only $68 if AI is used, while 56% of advisers expect generative AI to materially affect their business.
The debate is also reviving alternatives to percentage fees, including flat, subscription and hourly models, especially for wealthy clients whose larger portfolios do not necessarily require more complex advice.