Josh Olfert is a CFP in Canada. I probably won’t share a ton of his videos because his audience is more about people who are interested in getting into the financial industry, and less about what you should look for in an advisor or planner. Also, he’s in Canada so some of the laws and financial instruments are different.

However, in his video, The Death of AUM Fees, Why Planning Fees Are Taking Over, he kind of confirms what I’m slowly learning about financial advising fees. It has long been the norm for a planner or advisor to charge a client a percentage of the clients Assets Under Management, often shortened to AUM. And while it might still be the norm for most advisory firms, I get the sense that this is rapidly changing and is not the norm for emerging firms. 

If Client A has an AUM of $100,000 and is charged 2%, the fee is $2,000 annually. And if Client B has an AUM of $10,000,000, the fee is $200,000 annually. That’s a difference of $198,000 or 99% more than Client A pays. Does the advisor do 99% more work? Probably not. 

The above example is an oversimplifcation. And to be fair, the advisor is likely doing more work for that higher net worth client. It gives them the opportunity to be that much more diverse and do a lot more interesting things with their money.

Why am I sharing this? Because if I ever go the route of being a full-fledged financial advisor, fee only seems to be the way to go. And more and more I see professionals recommending to others that they seek out a fee only advisor.