By 2026, more than three-quarters of the wealth management industry (77.6%) is expected to operate on a fee-based model, representing an increase of more than five percentage points from 2024. This shift toward fee-based services is driven primarily by a transition from commissions to asset-based fees among the wirehouse and broker/dealer (B/D) channels, according to the latest Cerulli Edge—Americas Asset and Wealth Management Edition.

For financial advisors, asset-based fees remain the most popular fee structure, representing 72.4% of their compensation. In sharp contrast, commission-based revenues have declined to just 23% of an average advisor’s revenue, and advisors expect this to decline further over the next few years. Although many clients prefer fee-based pricing, advisors offer alternative fee structures to appeal to a wide range of clients across all ranges of investable assets.

“While asset-based fees are on the rise, they are not suitable in every situation,” says Andrew Blake, associate director. “Alternative fee structures, such as annual or hourly fees, can provide greater flexibility in client service and a competitive advantage for firms in the fee-based business model.”

Alternative fee structures and the option for clients to receive various planning services in one location can distinguish advisors and appeal to investors. More than one in five advisors (21%) report charging for financial plans and receiving a portion of their revenue from the associated fees, making this the most common nontraditional fee arrangement. Only 3% of wirehouse advisors report receiving revenue from fees for financial plans—but this figure rises to 38% in the insurance B/D channel and 35% in the independent B/D channel.

As the demand for comprehensive financial planning grows, Cerulli recommends advisor practices dedicate time to determine how they want to charge clients for the various services they offer beyond investment management.

“A divide exists between practices that include financial planning in their advisory fees and those that charge separate fees,” says Blake. “Advisors must be clear and concise about pricing structure and options to engage with this clientele, who may need clarification on what an advisory relationship entails. Open and candid discussions about the cost of services will build trust and strengthen relationships between clients and advisors while attracting prospective clients willing to pay for advice,” he concludes.