Financial advisors who work as independent contractors typically charge a client an annual fee in the neighborhood of 1 percent of a client’s assets. That would translate into an annual fee of $10,000 for a family with $1 million in assets.
Some firms are more expensive and others less, with advisors at large brokerage firms charging in a range of 80 basis points (0.8 percent) to 120 bps (1.2 percent) of assets to work with clients.
Broker-dealers charge clients commissions for transactions, but the retail brokerage industry has steadily shifted to asset-based fees over the past 20 years. Financial advisors are currently enjoying a golden age of sorts. The broad stock market continues to trade near record highs, which means the fees that advisors charge clients also increase. And the marketplace for advisors to sell their firms, particularly RIAs that generate attractive rates of cash flow, has never been more robust.
While many broker-dealer executives don’t see the asset-based pricing model about to shift, others are concerned that a change in pricing will eventually hit and potentially erode the bottom lines of firms like broker-dealers and registered investment advisors that work with financial advisors.
Advisors charging clients other types of fees, such as a flat-fee model or a subscription-fee model, has been widely discussed in recent years but not overwhelmingly adopted.
The financial advice industry has been holding its breath for more than a decade about a potential erosion in the level of fees it charges clients. It need look no further than the adjacent mutual fund industry for proof of sudden fee erosion.
Actively managed mutual funds once dominated the asset management market for retail investors and financial advisors. Drastically cheaper, often passively managed, exchange-traded funds have eaten away at actively managed funds.

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