Written By Travis Hornsby, CFA®, CFP®
Updated on July 16, 2025
Are assets under management fees bad for doctors and other high-income professionals? If you look at Reddit and other online forums, the vibe is clear that flat fees are pro-consumer and that “AUM fees” (as asset-based fees are often called) are rent-seeking.
If you look at the math, though, flat fees are often not in the interest of clients, because — like with any fee — there are problems and benefits to each pricing model.
We’ll look at what flat fee vs. AUM-based pricing models look like for doctors and other highly educated professionals so you can make up your own mind with data.
Flat fees are often marketed with a 0% price escalation in the long-term model
If you use an example of a doctor couple investing $100,000 per year into our financial advice calculator, here’s what the math shows (assuming a 20-year relationship with a planner). We’ll assume the flat fee for the planner is $500 per month with no AUM fee and no price increases ever, vs. a 1% AUM fee.
Here’s what it shows:
- $500 monthly flat fee: $126,000 over 20 years
- 1% AUM fee: $367,787 over 20 years
You might say, wow! The flat fee wins running away!
But consider this. Is the firm you’re working with charging 1%? Or are they charging less? Are there breakpoints involved where the firm gives you a break on additional funds you invest above a certain threshold?
Also, think about the flat fee. What chance is there that the same $500 monthly flat fee would last for 20 years?
It’s important to note that many of the VC-funded advisory firms that have touted flat fee marketing the loudest have consistently raised their pricing over time.
They do this even though their projections in their marketing have often shown a 0% increase in their fee schedule.
Some of these firms have consistently raised the flat fee they charge by 10% per year or more.
If you apply a 5% rate of growth to the flat fee listed above, the 20-year aggregate flat fee cost would be $214,316. If the AUM fee you’re charged is 0.5% instead of 1%, then the fee is $183,893, which is less than the flat fee.
But let’s check out a short-term example using this math, and you might be shocked.
Flat fees are often way more profitable short term
Consider the couple investing $100,000 per year. They can do $500 per month flat fee or 0.5% AUM fee. Let’s shorten the time horizon to just five years.
- $500 monthly flat fee: $36,000 over 5 years
- 0.5% AUM fee: $8,350 over 5 years
Because of the shorter time horizon, the flat fee firm earned more than 4.3 times the firm that charges AUM.
What if we reran this example with a 1% AUM fee?
- $500 monthly flat fee: $36,000 over 5 years
- 1% AUM fee: $16,700 over 5 years
That flat fee is still almost more than 2.2 times the infamous 1% AUM fee.
Related: Why a One Time Financial Advisor Could Cost You More in the Long Run
What about flat fee vs AUM fee scenarios where an investor has more money to invest?
Let’s take another look at the numbers and assume an investor starts with $1 million in initial capital, and then continues to invest the additional $100,000 per year.
- $500 monthly flat fee: $36,000 over 5 years
- 1% AUM fee: $$90,058 over 5 years
Why do so many VC-funded financial planning firms charge flat fees and market that AUM fees are bad?
Ultimately, what matters is the total amount of fees paid, both now and over time, and what the cost is relative to the value received.
If you received little value, any amount of fees you pay are a waste of money. If you received a tremendous value, you’d want that tremendous value to be larger than whatever fee you paid to get it.
My belief is that VC-funded registered investment advisors (RIAs) charge larger flat fees and no AUM fees because of the very nature of their incentive structure.
VC investors want to see returns ASAP. They don’t have a long-term time horizon, potentially decades long, where they’d want to wait around to see AUM growth on which AUM fees could be billed.
It’s in their interest to charge larger flat fees upfront to realize returns now instead of later.
After all, you can only compare AUM fees paid over many decades to alternative fee schedules if the firm you’re with lasts that long.
And in the RIA space, firms are often merging with other firms, and so having greater cost certainty over what you’ll pay in the short and medium term has a greater degree of certainty than what fee schedules would look like in 10+ years.
Value should be more than you pay, whether you’re paying flat fees, AUM fees or hourly
As I get older, what I care more about than finding the cheapest price is finding the highest value provider. I don’t necessarily want the cheapest if it will cost me a lot of my time or increase the risk that whatever advice or service I get is incomplete.
If you’re bothered by the thought of paying AUM fees, realize that’s fine. I would argue it’s because of a math mistake of assuming you’ve got millions to invest and those millions would immediately be subject to a 1% AUM fee, and thus all financial advice is a scam, and you should never pay for it.
What I’d say is that putting $2 million into a model portfolio of high-fee funds and giving no real advice beyond that is poor value. It’s highly profitable to the planner who can find a client like that.
If that’s you, or you’ve had a family member treated by a financial planner that way, I’m sorry.
What matters is what the firm you’re considering hiring actually charges, and whether you believe they can add significant value compared to other available options.
For SLP Wealth, we charge a blended fee to clients. It’s a flat fee for planning, and an AUM-based fee for clients who choose us to handle some or all of their investments.
Is that fee model perfect? Of course not, but we do our best to create a fee structure that offers flexibility, charges separate fees for separate services, and attempts to create a lower hurdle for providing value by charging a fee lower than many of our clients expect.
If we could help you and your family with your financial planning needs, try us out with a discount here.
