Flat Fee vs AUM Fee: What a High-Income Family Actually Pays

By Kevin Luu, Co-Founder and Chief Learning Officer. Reviewed on 2026-09-30.

An AUM fee (assets under management fee) is a percentage of your invested assets that an adviser charges every year, usually billed quarterly and taken straight out of your accounts. A flat fee is a fixed dollar amount agreed in advance that does not move when your portfolio grows. For a W-2 household with $2 million or more invested and large yearly savings from RSUs and 401(k)s, a percentage fee tends to rise much faster than the work does, so a flat fee can cost much less over ten years. Below the point where the two quotes meet, the AUM fee can be the cheaper option.

That break-even is simple to find: divide the flat quote by the AUM rate. A $20,000 flat fee and a 1% AUM fee cost the same at $2 million. Above that, every dollar you add to the portfolio raises the AUM bill, even if nothing about your planning got harder.

Why the fee model matters more at a $1 million household income

A physician couple in the Bay Area or an Amazon or Microsoft employee and spouse in Seattle can add $150,000 to $250,000 a year to investments from salary deferrals, ESPP purchases and RSUs that vest and get sold. That is the pattern that makes the fee model a real decision. With a percentage fee, your adviser earns more each year from your savings rate alone. With a flat fee, the price changes only when the scope of work changes.

The work these families actually need is mostly not stock picking. It is deciding how much company stock to hold after each vest, sizing the mega backdoor Roth, coordinating withholding when RSU income pushes the household into the top brackets, funding 529s, naming guardians and setting up trusts for minor children. Much of that work does not touch the accounts an AUM fee is charged on.

How an AUM fee is calculated

• The base. The rate is applied to the value of the accounts the adviser manages, usually measured at the end (or average) of each quarter, and one quarter of the annual rate is billed each time.
• Tiers or breakpoints. Many schedules charge a lower rate on assets above set levels. Ask for the blended rate on your actual balance, not the headline rate.
• What counts. Some advisers bill only on accounts they hold. Others also bill on your 401(k) or the brokerage account where your RSUs land. These are called held-away assets, and whether they are in the fee base can change the bill by thousands.
• What sits on top. The advisory fee does not include the expense ratios of the funds inside your accounts, custodian charges or trading costs.

You do not have to guess at any of this. A registered investment adviser generally must describe its compensation in Form ADV Part 2A, Item 5: the fee schedule, whether fees are negotiable, whether fees are deducted from your assets or billed, how often, and what other fees and expenses you may pay, such as custodian fees or mutual fund expenses (SEC Form ADV Part 2 instructions). You can look up most registered firms’ brochures on the SEC Investment Adviser Public Disclosure site before a first meeting.

How a flat fee works

A flat fee is usually an annual retainer, billed monthly or quarterly, set by the complexity of the household rather than the size of the portfolio. Equity compensation at more than one employer, a rental property, a trust or a family business typically moves the price up. A larger brokerage balance on its own does not.

Two variations are worth knowing. Some firms combine a flat planning fee with a smaller AUM fee for investment management, so read the ADV for both parts. Others quote a flat fee but cap the services, for example one tax review a year, so check what is included before you compare prices. Our guide to what fee-only planners cost covers the hourly and project options too.

Worked example: a $1.1 million household over ten years

Assumptions (all illustrative, not market data or a forecast): a married couple in San Jose, both W-2, $1.1 million combined income. They have $2.4 million invested across a taxable brokerage account, two 401(k)s and an RSU account, and they add $180,000 a year. The portfolio earns 6% a year before fees. They compare two quotes on the same scope of work:

• Adviser A: 1% a year on the full balance, charged at the start of each year (so $24,000 on the starting $2.4 million).
• Adviser B: $20,000 a year flat, rising 3% a year.

The year 1 difference looks small. By year 10 the AUM fee is more than double the flat fee, and nearly all of that increase comes from the family’s own savings plus market growth, not from extra work. Because the fees leave the portfolio and stop compounding, the flat-fee portfolio ends year 10 about $210,000 larger in this example ($6.35 million versus $6.14 million).

The result reverses for a family with $1 million invested and little new saving. There, 1% is $10,000 a year and the same $20,000 flat fee is the more expensive option. Fee model is a math question first, and the math depends on your balance and your savings rate.

Conflicts each model creates

No fee model is free of conflicts. The point is to know which way each one pulls.

For a family whose biggest decisions are about employer stock, housing and the kids, the AUM conflicts land on exactly the questions that matter most. The flat-fee conflict is easier to manage: get the scope in writing and review it each year.

Are AUM fees worth it? A five-question check

1. What will I pay in dollars this year and in year five? Ask the adviser to project both on your real savings rate.
2. Which accounts are in the fee base? Get it in writing, including 401(k)s, RSU accounts and any 529s.
3. What work is included? Tax projections around RSU vests, equity compensation, estate coordination and insurance reviews should be listed, not implied.
4. Is the fee negotiable? Item 5 of the ADV has to say. Many families never ask; see why adviser fees are often negotiable.
5. How is the adviser paid beyond the fee? Commissions on insurance or annuities create a separate conflict. Our vetting checklist shows where to confirm it.

If the AUM quote is lower in dollars over the next five years and covers the same work, it can be the better deal. If it is higher and the extra money buys nothing you can name, it is not.

Common mistakes families make

• Comparing percentages instead of dollars. “0.8%” on $4 million is $32,000 a year.
• Ignoring the growth path. A fee that is fair at $2 million may not be fair at $5 million for the same work.
• Leaving the 401(k) and RSU account out of the advice because they are not billed, even though they are often the largest and most concentrated holdings. Coordinated investment and concentration risk work and tax planning around vests should cover every account.
• Never re-checking. Review the fee once a year against what was actually delivered.

What to document for your kids

Write a one-page Decision Memo: who you hired, how they are paid in dollars, what they do and do not cover, and the date you will review it. Your children will one day hire advisers of their own, and the most useful thing you can leave them is the reasoning, not the account statements. As Kevin Luu puts it: “Your kids don’t need to inherit your portfolio. They need to inherit your decision-making process.”

Frequently asked questions

Is a 1% AUM fee high?

It depends on your balance and what it buys. On $1 million, 1% is $10,000 a year; on $3 million, it is $30,000 a year for what may be the same work. Convert any percentage quote into dollars for this year and five years out, then compare it with a flat-fee quote for the same written scope of services.

Can a fee-only adviser charge an AUM fee?

Yes. “Fee-only” describes who pays the adviser: only you, with no commissions from products. It does not describe how the fee is set. A fee-only adviser can charge a percentage of assets, a flat retainer, an hourly rate or a mix, and Form ADV Part 2A must spell out which.

Does a flat fee mean I get less investment management?

Not necessarily. Many flat-fee advisers manage the portfolio as part of the retainer. What changes is how the price is set, by complexity rather than balance. Check the ADV and the agreement for what is included, how often the portfolio is rebalanced and whether held-away accounts are covered.

Next step: pull your current adviser’s Form ADV Part 2A, find Item 5, and write down what you paid last year in dollars. If you want a second view on your fees alongside your RSU, tax and estate picture, the Tax & Wealth Assessment covers it. This article is general education; the right choice depends on your family’s full picture.

Written by

Kevin Luu

Co-Founder and Chief Learning Officer, Bright Advisers

Kevin has advised high-income W-2 tech and biotech families since 2015, and leads the education-first Age Five Family Office from Brea, California.

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