Advisor Fees Compared: AUM, Flat, Hourly, and Commission

Updated September 26, 2026.

AUM fees charge against assets; flat fees charge for a defined engagement; hourly fees charge for time; commissions compensate a transaction or product sale. None of those labels tells you everything about the services, total cost, or incentives involved.

A useful comparison puts the proposed annual dollar cost beside the work you need done. Then it identifies what changes the bill and who is responsible for implementation. This guide provides the formulas and a practical way to compare quotes. Dollar amounts below are illustrative unless identified as a published product price.

The four models at a glance

A firm may combine models. An annual planning fee can sit beside an investment-management fee; a financial professional may have both advisory and brokerage roles. Ask which role and compensation arrangement applies to the particular recommendation.

The SEC's guide to investment advisers explains why the agreement and disclosure documents matter. Read the actual service terms rather than inferring them from a marketing label.

AUM: translate the percentage into dollars

At a constant billable balance, an illustrative 1% annual fee costs $2,500 on $250,000, $10,000 on $1 million, and $30,000 on $3 million. Those calculations are exact under the stated assumptions. They are not evidence that every advisor charges 1%.

AUM can be convenient when you want an ongoing relationship that includes investment implementation. But the bill can rise with asset values even when the amount of work does not change proportionately. A declining percentage at higher balances can still produce a larger dollar payment.

For example, 1% of $2 million is $20,000, while 0.8% of $4 million is $32,000. The second rate is lower; the second dollar bill is 60% higher. This is why both measures belong in a review.

Check tiers and account coverage

Ask whether a lower tier applies only to assets above a threshold or reprices the entire account. Ask whether household accounts combine for pricing and whether cash, held-away assets, or workplace plans are included. A quoted rate without a defined asset base is not a complete quote.

Billing convention also matters. An agreement may use a particular valuation date or average assets, bill in advance or arrears, and prorate deposits or withdrawals. Request an example invoice using your actual account arrangement. For a worked marginal-tier calculation, see fees on a $2 million portfolio.

The incentive to understand

An asset-based arrangement can create an incentive to retain or increase billable assets. That is a question to discuss when evaluating debt repayment, a rollover, a large gift, or a withdrawal. It is not proof that a recommendation is wrong. Ask how alternatives were evaluated and where the conflict is disclosed.

Flat fees: make the scope as clear as the price

A flat fee gives you a stated charge for an engagement. It may be an annual retainer, a recurring subscription, or a one-time project. Those are not interchangeable. A $5,000 annual retainer and a $5,000 initial plan can have very different second-year costs and obligations.

The arithmetic can help shortlist providers. A hypothetical $5,000 annual fee equals a flat 1% AUM fee at $500,000 of billable assets: $5,000 divided by 0.01. Above that balance, the fixed amount is lower under those assumptions. Below it, the percentage amount is lower.

These are fee equalities, not recommendations or service-equivalence tests. A fixed-fee planner may supply advice while you place trades, or may include implementation under a separate arrangement. Read the scope.

Ask what happens when complexity changes. Does a business sale, additional household member, new trust, or extra planning project change the fee? Is the price fixed for one year or indefinitely? Predictable billing still requires clear renewal terms.

Hourly and project fees: define a finish line

Hourly advice can suit a bounded problem: reviewing a retirement assumption, obtaining a second opinion, or investigating a specific planning decision. Its usefulness depends on agreeing what question will be answered and which records the professional needs.

At an illustrative $300 per hour, five hours cost $1,500, ten cost $3,000, and twenty cost $6,000. A $5,000 retainer equals approximately 16.67 hours at that rate. The hourly figure is a calculation input, not a quoted industry standard.

An estimate is more useful when it distinguishes preparation, meetings, analysis, written recommendations, and follow-up. Ask for a limit that requires approval before additional work. For a fixed project, agree which changes are in scope and what marks completion.

Account for the work after the meeting

A plan may still need implementation. Establish who changes beneficiaries, places trades, coordinates tax work, maintains the records, and checks progress. Paying for a completed analysis does not automatically create an ongoing monitoring relationship.

There is also a practical cost to leaving questions unanswered. If metered billing discourages you from requesting help you actually need, compare a retainer or another ongoing arrangement. Conversely, paying for continuous access is hard to justify if you use it once and do not need ongoing services.

Commissions: trace the cost and the recommendation

A commission compensates a transaction or sale. Depending on the product and arrangement, charges may be explicit, incorporated in a product's terms, or accompanied by ongoing expenses. Do not assume every cost will appear as a single advisory-fee debit.

For mutual funds, review sales charges, ongoing expenses, share classes, and any restrictions in the prospectus. The SEC's fund-fee guidance explains the difference between shareholder fees and operating expenses. A surrender charge is a separate potential cost of exiting certain products; it is not simply another name for the salesperson's commission.

For a hypothetical front-end sales charge of 5% applied to a $20,000 payment, the charge is $1,000 and $19,000 remains to invest before any other applicable costs. This is a simple illustration, not a typical rate or a product quote. The actual calculation basis, timing, discounts, ongoing expenses, and restrictions come from the product documents.

Ask what the professional receives, whether compensation differs among suitable alternatives, and what you would pay if you held the product for one, five, or ten years. Product selection, ongoing expenses, and exit restrictions can matter more than whether the initial advice appeared to be free.

A commission does not by itself establish that a product is unsuitable. Nor does the absence of a commission establish that an arrangement has no conflicts. Evaluate the recommendation, costs, responsibilities, and applicable obligations together.

Fee-only and fee-based are not the same pricing model

A fee-only financial professional is compensated through client fees rather than product-sale commissions. Verify the actual arrangements for both the firm and the individual. NAPFA explains its fee-only standard.

“Fee-only” describes a compensation approach rather than whether the charge is hourly, flat, or asset-based. It should not be read as “no incentive to examine.” An hourly model rewards additional time; an asset-based model can reward retaining billable assets; a retainer requires scrutiny of scope and service delivery.

“Fee-based” can describe an arrangement involving fees and other compensation. Because terms can be used loosely in marketing, ask the professional to explain every way the firm and individual may be compensated. Their agreement and disclosures are more dependable than an adjective.

Use Form CRS as a starting point for the relationship, costs, conflicts, and disciplinary questions, then read the fuller documents it references. Check the actual professional and firm rather than assuming a familiar brand name settles the inquiry.

Where a Mezzi subscription fits

Mezzi offers a different ongoing guidance workflow. You connect supported financial accounts, add relevant personal context, and ask questions about decisions across investments, banking, other assets, and liabilities. AI Personalization helps explain your goals and preferences; Exposure X-Ray helps investigate underlying fund exposure.

Current annual pricing is $399 for Advisory and $999 for Concierge, alongside Free. These are subscription prices, not charges against your portfolio balance. Concierge's published benefits include setup assistance and quarterly coaching check-ins. A subscription should still be evaluated by its scope and your actual use.

Mezzi does not take custody, place trades, or replace every specialist engagement. A self-directed household may use it alongside a planner, tax professional, or attorney. Include any incremental professional costs when comparing that arrangement with a managed service. Fund and brokerage expenses do not disappear because the advice fee is fixed.

Compare quotes on one page

For each candidate, write the first-year cost, later recurring cost, included deliverables, excluded work, who implements decisions, and how the relationship ends. Add the expected investment expenses separately and identify any charges already included in a package.

Then apply the same scenario to each quote. If one includes portfolio implementation and another only supplies recommendations, state who will do the missing work. If one includes a planning project only in year one, show that rather than treating every year as identical.

The preferred arrangement is the one that supplies the work you need at a cost you understand and are willing to pay. A pricing model helps explain the bill. It cannot make the decision for you.

Frequently asked questions

Is a flat fee always cheaper than AUM?

No. Divide the flat annual fee by the comparable asset-based rate to find the illustrative fee equality, then check minimums, tiers, and service scope. The lower dollar charge can change with the account size.

Does fee-only mean there are no conflicts?

No. Different billing structures create different incentives. Ask how the professional is compensated and how relevant conflicts are addressed.

Does an hourly plan include investment implementation?

Only if the engagement says so. Define who implements recommendations and whether any follow-up or ongoing monitoring is included.

Is Mezzi's subscription equivalent to a full-service advisor?

Not automatically. Compare the specific responsibilities. Mezzi supplies connected guidance while you retain implementation responsibility and may need separate professional services.