In an industry where a client’s experience and their perceived value of an advisor’s services drive retention and referrals, we believe correctly pricing your wealth management services is essential. Many registered investment advisors (RIAs) default to an assets under management (AUM) pricing model, which has been durable over the years. As client expectations shift and competitive pressures increase, ensuring that your pricing structure aligns with the value you deliver is essential for long-term success.

A well-designed pricing strategy not only protects profitability but also enhances client relationships, reinforces service differentiation, and supports business reinvestment. By assessing key pricing metrics, service segmentation, and fee structures, RIAs can refine their approach to optimize revenue.

The Enduring Strength of the AUM-Based Model

Despite the rise of alternative fee structures—such as retainers, project-based fees, and subscription models—the AUM model remains dominant, accounting for nearly 80% of RIA revenue.[i] Clients continue to prefer this model because it aligns their advisor’s incentives with their financial success.[ii]

However, maintaining a competitive AUM-based pricing model requires regular benchmarking and strategic adjustments. Firms might unknowingly erode profitability through discounting, outdated fee schedules, or inefficient service structures. To maximize value for both the firm and the client, RIAs generally should strive to ensure that their pricing remains fair, transparent, and reflective of the comprehensive services provided.

Key Pricing Considerations for RIAs

1. Aligning value and fees

Clients today expect more than just investment management. They want holistic financial planning, estate strategies, tax planning, and lifestyle guidance—all of which require a thoughtful pricing approach. We believe RIAs should structure their fees based on the full scope of value delivered and help their clients understand how pricing correlates with their advisory experience.

Studies show that younger investors (Generations Y and Z) increasingly seek advisors who offer services beyond investment management.[iii] By incorporating financial wellness, impact investing, and legacy planning, firms can justify their pricing and may improve both client acquisition and retention.

2. Establishing minimum fees for service sustainability

One challenge many RIAs face is maintaining service quality across a diverse client base. Setting minimum fees helps establish that all clients contribute fairly to the firm’s revenue, possibly reducing the risk of lower-AUM clients receiving disproportionately high levels of service. Industry benchmarking studies suggest that successful RIAs implement minimum annual fees, depending on their service model.

For firms serving ultra-high-net-worth (UHNW) clients, it may be necessary to establish a separate fee structure with a minimum annual fee commensurate with the comprehensive services.

3. Household aggregation for pricing efficiency

Many RIAs aggregate accounts within a household to apply a blended AUM fee. This practice may benefit multi-generational planning and client retention, but it requires clear policies. Generally, advisors should:

• Confirm that all aggregated accounts are on the same fee schedule.
• Limit household aggregation to immediate family or dependents.
• Avoid excessive aggregation that could lead to unnecessary fee compression.

 

4. Managing fee discounts and legacy clients

Fee discounting has become a silent profitability killer for many RIAs. While offering discounts to attract or retain clients may seem beneficial in the short term, it can create inconsistencies in pricing and lead to cross-subsidization, where full-paying clients may effectively subsidize discounted ones.

To address this, firms should:

• Regularly audit their fee structures to identify discounted accounts.
• Align legacy clients with the current pricing model through proactive conversations.
• Introduce a streamlined service model for lower-revenue clients instead of offering discounts.

 

Measuring Pricing Efficiency: The Gross Fee Efficiency (GFE) Metric

We believe one of the most effective ways to assess a firm’s pricing effectiveness is by calculating gross fee efficiency (GFE). We suggest using this as a KPI to measure the percentage of total billable AUM that is generating revenue at the firm’s target pricing levels.

In our view, a well-run RIA typically achieves a GFE between 75%-85%, while firms with excessive discounts or misaligned pricing models often fall below . We believe regularly tracking this metric can help advisors refine their pricing strategy and improve long-term profitability.

Implementing an Effective Pricing Strategy

To maintain a competitive and sustainable pricing model, we believe RIAs should:

1. Benchmark against the industry – Regularly compare your pricing model with peer firms so you can aim to stay competitive and aligned with market trends.
2. Define a transparent fee schedule – Standardize your pricing structure to minimize exceptions and provide clarity for clients.
3. Educate clients on the value of advisory services – Clearly communicate the breadth of services provided beyond investment management, highlighting personalized planning and proactive wealth strategies.
4. Conduct a client value review – Regularly engage clients in discussions about the value they receive, reinforcing why your pricing model is fair and appropriate.
5. Reprice legacy clients where needed – Gradually transition clients on outdated fee schedules to current pricing to ensure fairness and sustainability.

 

Pricing as a Growth Lever

In our view, pricing is more than just a revenue generator—it’s a strategic tool that shapes client relationships, defines service expectations, and builds business sustainability. By implementing a disciplined, transparent, and value-driven pricing strategy, RIAs can enhance their client experience, drive growth, and strengthen profitability.

As competition in the wealth management space intensifies, firms that proactively refine their pricing strategy will likely be better positioned to attract and retain high-value clients while maintaining a thriving, scalable practice.

Are you ready to evaluate your pricing structure and explore whether it aligns with the value you deliver? Reach out to Focus Partners Advisor Solutions for more insights.

 

Sources: (i) Dimensional Global Advisor Study 2024, (ii) Kitces.com, and (iii) Fidelity Institutional Insights 2024.

This is for informational purposes only. The information provided does not purport to present a complete picture, but Advisor Solutions believes the information is representative of issues and needs facing some clients and why they may seek this service. Nor should it be construed as, specific investment, tax, or legal advice. Individuals should seek advice from their wealth advisor or other advisors before undertaking actions in response to the matters discussed. No client or prospective should assume the above information serves as the receipt of, or substitute for, personalized individual advice.

This represents the opinions of Advisor Solutions, may contain forward-looking statements, and presents information that may change due to market conditions or other factors. Nothing contained in this presentation may be relied upon as a guarantee, promise, assurance, or representation as to the future. This is prepared using third party sources considered to be reliable; however, accuracy or completeness cannot be guaranteed. The information provide will not be updated any time after the date of publication. Numerous representatives of Advisor Solutions may provide investment philosophies, strategies, or market opinions that vary.

Services are offered through Focus Partners Advisor Solutions, LLC (“Advisor Solutions”), an SEC registered investment adviser. Registration with the SEC does not imply a certain level of skill or training and does not imply that the SEC has endorsed or approved the qualifications of Advisor Solutions or its representatives. Prior to January 2025, Advisor Solutions was named Buckingham Strategic Partners, LLC. Advisor Solutions has been part of the Focus Financial Partners partnership since 2007.

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[i] Dimensional Global Advisor Study, 2024

[ii] https://www.kitces.com/blog/bottom-dollar-effect-and-behavioral-finance-bias-for-aum-over-retainer-fees

[iii] Fidelity Institutional Insights 2024