Why the stated fee understates the total cost
Most advisory firms quote their fee as a percentage of assets under management or as a flat annual retainer. That number describes only the advisory fee — the amount that goes directly to the firm for investment management and planning services. It does not describe:
- The internal expense ratios of any mutual funds, ETFs, or separately managed accounts used in your portfolio
- Third-party service costs — tax preparation, estate legal work, bill pay, consolidated performance reporting — that may be included, excluded, or billed separately depending on the firm
- Custodial fees charged by the institution holding your assets, though many are waived above certain thresholds
- Transaction costs in strategies with frequent trading or illiquid holdings
A firm quoting a lower headline advisory fee may have higher investment costs inside the portfolio or bill separately for services a competitor bundles. To compare proposals accurately, you need a total annual cost estimate that includes all layers.
The SEC requires registered investment advisers to disclose their fees clearly in their Form ADV, including all types of compensation they or their affiliates receive. Requesting and reading the ADV for each firm you evaluate is the most reliable way to understand the full cost picture before signing anything.1
Fee structures by model
The fee structure follows from the operating model. Understanding which structure a firm uses — and what it covers — is the first step in any comparison. See the full model comparison for context on how these arrangements differ beyond cost.
Coordinated advisor (most common for $5M–$30M families)
Most families in the $5M–$30M range work with a fee-only registered investment adviser who charges an assets-under-management fee on the portfolio they directly manage. This fee typically covers investment management and financial planning. Coordination with outside tax and legal professionals is usually included in the advisory relationship, though the cost of those outside professionals — CPA, estate attorney — is separate and billed directly by them.
Some coordinated advisors supplement the AUM fee with project fees or hourly charges for work outside investment management: estate plan reviews, retirement income modeling, business-sale planning. Ask whether any planning service you expect is included in the AUM fee or triggers an additional charge.
Multi-family office
Multi-family office arrangements vary considerably in how they price their services. Some use an AUM fee similar to a coordinated advisor, with separately billed project work. Others charge a flat annual retainer that bundles a broader service set — investment management, tax preparation, estate coordination, consolidated reporting — into one number. Still others combine an AUM-based fee with a minimum retainer for the base service layer.
The retainer structure can be economical when the bundled services are ones you would otherwise pay for separately. It can be expensive when the bundle includes services you don't need. Ask for a line-item breakdown of what the fee includes and request a separate quote for each service you would use and those you would not.
Single-family office
At the SFO level, the cost is the direct overhead of operating a team: compensation and benefits for a CIO, CFO, and support staff; technology and data systems; legal and compliance costs; office costs. This is a direct expense rather than an advisory fee and is typically viable only for assets well above $100M. See the asset minimum guide for the arithmetic behind this threshold.
Families at the SFO level still incur investment costs inside the portfolio and third-party costs for specialized legal and tax work the internal team cannot or does not perform.
Investment costs inside the portfolio
The funds and accounts used to implement your investment strategy carry their own costs, separate from the advisory fee. These are deducted from the portfolio directly and do not appear on an invoice — which is why they are often overlooked when comparing proposals.
- Mutual fund and ETF expense ratios. Every fund charges an annual expense ratio, expressed as a percentage of assets, deducted from returns. A portfolio built primarily on low-cost index funds may carry expenses of a few basis points per year; a portfolio using actively managed funds or alternatives can carry expenses several times higher. Ask for a weighted average expense ratio across the entire proposed portfolio.2
- Separately managed accounts. Some advisors use SMAs — direct ownership of individual securities managed to a strategy — rather than funds. SMAs may have lower internal costs for large allocations, but often have higher trading costs and minimum investment requirements. Ask what percentage of the portfolio would be held in SMAs and what the direct cost is.
- Alternative investments. Private equity, hedge funds, and other alternatives typically carry management fees and performance-based fees (often called carried interest) that are substantially higher than public-market fund costs. If a proposed portfolio includes alternatives, ask for a complete disclosure of all fees associated with each position.
Separately billed services
The following services are sometimes included in an advisory fee and sometimes billed separately. Confirm in writing which category applies for each service you expect to use.
- Tax preparation. Investment-aware tax strategy is common across most advisory arrangements. Preparing and filing actual tax returns — personal 1040s, trust returns, K-1s, state filings — is different. Ask whether your return preparation is included, and if so, which return types and how many entities.
- Estate coordination. Most coordinated advisors work with your existing estate attorney or help you find one. Drafting or updating estate documents — wills, trusts, beneficiary designations — is legal work billed separately by the attorney. Confirm the distinction between "coordination" and "legal drafting."
- Consolidated performance reporting. If you hold assets across multiple custodians or have accounts the advisor does not directly manage, comprehensive reporting across all holdings typically requires additional aggregation software. Ask whether consolidated reporting is included in the advisory fee or billed as a technology charge.
- Bill pay and household administration. Paying recurring bills, managing vendor relationships, and handling household cash flow are operational services. Some multi-family offices include them in the base engagement; coordinated advisors typically do not.
- Insurance analysis. Many advisors can review your existing life, disability, or liability coverage and identify gaps. Placing or managing insurance policies is a licensed activity and may involve separate compensation to an insurance professional.
Getting a comparable total cost figure
To compare proposals on equal footing, ask each firm for a single total cost estimate — in dollars, not percentages — that includes every layer: advisory fee, investment costs inside the portfolio, and any separately billed services you expect to use. Then apply the same list of services to each proposal so you're comparing equivalent service bundles.
The fee comparison tool lets you model assumptions side by side using your own inputs. It uses hypothetical defaults — it does not reproduce any firm's actual pricing — but it is useful for understanding how different fee structures add up over time.
When comparing, also confirm:
- Whether the advisory fee is charged on assets under management or on total household net worth
- Whether the fee schedule is tiered and what rate applies at your asset level today versus at a higher or lower level
- Whether the fee applies differently to different account types — retirement accounts, trusts, business entities
- How the fee changes if your assets grow significantly after a liquidity event
Use the due diligence question guide for a complete list of fee-specific questions to send to each firm before your first meeting.
A note on fee-only versus fee-based
The distinction between "fee-only" and "fee-based" compensation is meaningful and worth understanding. A fee-only firm charges clients directly — advisory fees, retainers, or project fees — and does not receive commissions or revenue-sharing from fund companies, custodians, or insurance carriers. A fee-based firm may receive both client fees and third-party compensation, which creates potential conflicts of interest that should be disclosed in their Form ADV.3
Fee-only compensation does not guarantee better performance or superior service. It does mean the firm has fewer structural incentives to recommend products that pay them more. For families comparing proposals, asking each firm directly whether they are fee-only — and reading their ADV to confirm — is a useful filter early in the process.
Sources & further reading
Source pages reviewed October 2026. Fee ranges and structures described are general in nature; actual fees vary by firm, engagement, and asset level. Tool defaults are explicitly hypothetical.