By Kevin Luu, Co-Founder and Chief Learning Officer. Reviewed on 2026-09-30.
Typical financial advisor fees fall into five models: a percentage of the assets managed, a flat annual retainer, an hourly or project fee, commissions on products sold, and a monthly subscription. No regulator publishes an official average fee for 2025 or 2026. A 1% annual fee is a common reference point (the SEC uses it in its own fee illustration), many asset-based schedules step down on larger balances, and the cost of the funds themselves is charged on top.
For a two-career family earning around $1 million with $2 million or more invested, the model matters less than two questions: what the fee is charged on, and what you actually get for it. The worked example below shows how the same household can pay about $19,700 or about $33,900 a year for similar service, depending on those details.
The five ways advisers charge
| Model | How you pay | Built-in conflict to ask about |
|---|---|---|
| Percentage of assets (AUM) | A yearly percentage of the account value, often billed quarterly and deducted from the account | The fee grows when money stays in the account, so paying down a mortgage or funding a 529 elsewhere lowers the adviser’s pay |
| Flat annual retainer | A fixed dollar fee for a written scope of work | Scope creep: what sits outside the retainer and costs extra |
| Hourly or project | Pay for a plan or a single decision, then carry it out yourself | Few conflicts, but the plan only helps if someone implements it |
| Commission | The adviser is paid by the product provider (sales loads, 12b-1 fees, insurance commissions) | Pay differs by product, which can steer the recommendation |
| Subscription | A monthly or annual fee for ongoing access, often with limited scope | Usually built for simpler situations than RSUs, two employers and trusts |
Many advisers combine models, for example an asset-based fee plus commissions on insurance. The SEC requires every registered adviser to disclose this. Form ADV Part 2A, Item 5, requires the adviser to provide its fee schedule, disclose whether fees are negotiable, explain how and how often it bills, describe other costs such as custodian fees and mutual fund expenses, and, if it accepts compensation for selling investment products, explain that this is a conflict of interest (SEC Form ADV Part 2 instructions).
What the fee is charged on matters more than the percentage
For a delegating W-2 family, three details move the dollar cost more than the headline rate.
Householding
Householding means the adviser adds all family accounts together (joint account, each spouse’s IRA, the kids’ 529s) and applies the tiered schedule to the combined total. Without it, each account starts again at the highest tier. Ask whether householding is in writing and which accounts it covers.
Which assets are in the fee base
Vested company stock from RSUs, held at your employer’s plan broker, can quietly become billable once it is moved to the adviser’s custodian. If the plan is to sell most of it over the next two years, paying an ongoing fee on it may make little sense. The same question applies to cash waiting for a home purchase.
The fund layer underneath
Every mutual fund and ETF deducts its own expense ratio from its return. You never see a bill. A low advisory fee on top of costly active funds can cost more than a higher advisory fee on index funds.
Worked example: a $1.1 million San Mateo household
Assumptions (all hypothetical, for illustration only): a Genentech scientist and a physician, married filing jointly, $1.1 million combined W-2 income, two children aged 4 and 7. Investable assets of $2.15 million: a $1.2 million joint taxable account, rollover IRAs of $500,000 and $300,000, and $150,000 in two 529 plans. They also hold $900,000 of vested company stock from RSUs at the plan broker. The adviser’s sample schedule is 1.00% on the first $1 million, 0.75% on the next $2 million and 0.50% above $3 million.
- Householded AUM, index funds. $10,000 on the first $1 million plus 0.75% of $1,150,000 ($8,625) = $18,625. Index funds at 0.05% add $1,075. Total about $19,700 a year.
- No householding, active funds. Each account billed on its own: joint $11,500, IRAs $5,000 and $3,000, 529s $1,500 = $21,000. Active funds at 0.60% add $12,900. Total about $33,900 a year.
- Company stock added to the base. Householded billing on $3.05 million comes to $25,250, which is $6,625 a year more than option 1 for holding stock the family may be selling anyway.
- Flat retainer. A sample $20,000 retainer covering investments, RSU sale planning, tax coordination and estate document review, plus $1,075 in index fund costs, is about $21,075. It does not rise when markets do.
- Hourly. 25 hours at a sample $400 is $10,000, plus $1,075 in fund costs. Cheapest on paper, but the family implements every trade, rebalance and beneficiary form themselves.
The gap between options 1 and 2 is about $14,200 a year, or about 0.66% of assets. Assuming a 6% gross return, no new savings and costs staying at the same percentage, $2.15 million grows to about $5.80 million over 20 years at the lower cost and about $5.11 million at the higher one. That is a difference of roughly $690,000 for broadly similar service. The SEC makes the same point on a smaller scale: its investor bulletin charts $100,000 growing at 4% a year for 20 years with ongoing fees of 0.25%, 0.50% and 1% (SEC Investor Bulletin on fees). On those assumptions, the 1% fee leaves about $28,000 less than the 0.25% fee.
How advisory fees are taxed in California and Washington
Federal. Investment advisory fees are a miscellaneous itemized deduction. The federal suspension of those deductions, first set for 2018 through 2025, was made permanent by the One Big Beautiful Bill Act (P.L. 119-21, section 70110), so for 2026 advisory fees are not deductible on the federal return (P.L. 119-21; IRC section 67).
California. California does not conform and still allows miscellaneous itemized deductions above 2% of federal AGI on Schedule CA (FTB 2025 Form 540 booklet, Schedule CA instructions). In the example, AGI is about $1,051,000 after each spouse defers the 2026 401(k) limit of $24,500 (IRS Notice 2025-67), so the 2% floor is about $21,020. The share of the option 1 fee that relates to the taxable account is about $10,400, well under the floor, so the California benefit is zero. At this income the deduction rarely makes a real difference, and California also limits itemized deductions once federal AGI exceeds $504,411 for joint filers (2025). A CPA should confirm treatment for your return.
Washington. Washington has no individual income tax in 2026, so there is no state income tax deduction to claim. A 9.9% tax on AGI over $1,000,000 takes effect in 2028 (WA DOR); how it will treat investment expenses has not been published.
The practical takeaway for both states: judge a fee on its pre-tax dollar cost. Do not count on a deduction to soften it.
The decision a delegating family actually makes
High-earning parents with young kids rarely want to run their own portfolio. The real choice is between paying for investment management alone and paying for someone to coordinate the RSU sales, withholding shortfalls, beneficiary designations, guardianship and trust documents that sit around it. Use this checklist when you compare quotes:
- Convert every quote to annual dollars on your actual accounts, fund costs included.
- Get householding and the fee base (which accounts, whether company stock is included) in writing.
- Ask for Form CRS, the short relationship summary (no more than two pages for a stand-alone adviser, four for a firm that is also a broker-dealer), and the full Form ADV Part 2A. Look up the adviser on the SEC Investment Adviser Public Disclosure site.
- Ask whether the adviser or anyone at the firm receives commissions, and whether advisory fees are reduced to offset them.
- List what is included: equity compensation planning, tax return review, estate coordination, education for your children.
- Ask whether the fee is negotiable. Item 5 requires the adviser to say so.
Common mistakes at this income level
- Comparing percentages across advisers without adding fund expenses.
- Letting concentrated company stock slide into the fee base before a sale plan exists.
- Paying a low hourly fee for a plan, then never implementing it because both parents work 60-hour weeks.
- Assuming “fee-based” means fee-only. Fee-based advisers may also earn commissions.
What to write down for your kids
Your children will one day hire, or fire, an adviser of their own. A one-page note on why you chose your current arrangement, what it costs in dollars each year, and what you would change if it stopped earning its fee is a small entry for your FamilyKnowledge® Library that teaches more than a statement ever will. 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 1% a fair fee for a financial advisor?
It depends on what the 1% buys and what it is charged on. On a $1 million portfolio it is $10,000 a year before fund costs. For a household with RSUs, two employers and estate documents to coordinate, it can be reasonable if those services are included. For investment management alone on index funds, many families compare it against a flat retainer.
Are financial advisor fees negotiable?
Often, yes. SEC-registered advisers must disclose in Form ADV Part 2A, Item 5, whether their fees are negotiable. Larger householded balances, a narrower scope, or excluding assets you plan to sell soon are the usual starting points. Ask for any agreed change in writing, including the exact fee schedule and which accounts are billed.
What does advisor fee householding mean?
Householding combines related accounts, such as a joint account, each spouse’s IRA and children’s 529 plans, so the tiered fee schedule is applied to the total rather than to each account separately. In the example above it saves about $2,375 a year on $2.15 million. Confirm which family members and account types qualify.
Next step
Pull your last four quarterly statements, add up the advisory fee and the fund expenses in dollars, and compare the total with the list of services you actually use. For more detail on fee levels, see how much a wealth manager costs, average investment management fees and private bank versus independent adviser fees, or read what share of advisers are fiduciaries. Our investment and risk management and tax management pages describe how Age Five Family Office™ works with families. If you want a second opinion on your current fees, the Tax & Wealth Assessment is a good place to start.
This is general education, and the right choice depends on your family’s full picture.
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.
Connect on LinkedIn → · About KevinThis is part of how we approach Investment & Risk Management for high-income W-2 families at Bright Advisers.
Keep reading