Financial advisors are under pressure to offer more services for less due to fee compression

From Yahoo Finance: 2025-06-29 08:00:00

Financial advisors are feeling the pinch as fee compression pushes them to offer more services to clients. Research by Cerulli Associates shows that the 1% advisory fee is becoming more of a myth, with 83% of advisors now charging less than 1% for clients with over $5 million in assets.

For clients with over $10 million, the average fee is expected to be around 66 basis points. Meanwhile, those with $100,000 portfolios are paying around 1.25%. Advisors are now being asked to provide services like tax planning, estate planning, and even emotional coaching for intergenerational wealth.

Asset-based fees continue to dominate advisory models, with advisors earning an average of 72% of their compensation from them. Commissions are expected to fall below 17% in the next year. Non-traditional fee models, such as annual retainers and fees for financial plans, are gaining traction among fee-conscious investors.

Fee compression is forcing advisors to offer more services for less, leading to a shift from investment management to comprehensive financial problem-solving. Advisors like Kyle Ray are adapting by offering flat-fee wealth management services that provide more value at the same price point.

As fee compression continues, advisors will need to strike a balance between competitive fees and robust service offerings. Independent firms like Toberman Becker Wealth are operating with reduced overhead to offer personalized, high-value services below the industry average. Clients are encouraged to focus on total value, including expertise and tailored strategies, for long-term financial success.

Read more: Advisors Increasingly in Scramble Mode Over Fee Pressure