Nobody would sign a $50,000-a-year contract without reading it. Yet families sign advisory agreements at that price every day, because the number on the page says “1.00%” and the number on the invoice never arrives. The fee comes out of the account, quietly, every quarter. It is the most expensive recurring bill most wealthy families have, and the one they look at least.
Translate every percentage into dollars
| Annual fee | On $5 million | On $10 million | On $20 million |
|---|---|---|---|
| 1.00% | $50,000 | $100,000 | $200,000 |
| 0.75% | $37,500 | $75,000 | $150,000 |
| 0.50% | $25,000 | $50,000 | $100,000 |
Small differences are not small. On $10 million, the gap between 1.00% and 0.60% is $40,000 a year, or $400,000 over ten years, before a dollar of growth. That is a house, a grandchild’s education, or a decade of giving.
None of this means cheaper is better. A fee is only expensive relative to what it buys. The point is to know the number and decide whether the work is worth it, instead of never seeing it at all.
What a fee does over 20 years
A fee doesn’t just cost what it costs this year. Every dollar taken out stops compounding for you. Here is $5 million over 20 years, assuming a hypothetical 6% annual return before fees. The return is an assumption for illustration, not a forecast or a promise.
| Annual fee | Ending value | Left behind versus 0.50% |
|---|---|---|
| 0.50% | About $14.59 million | — |
| 0.75% | About $13.91 million | About $676,000 |
| 1.00% | About $13.27 million | About $1.32 million |
The fee that looks like a rounding error on a statement is a seven-figure decision over a retirement. That is exactly why it deserves the same scrutiny as the portfolio it’s charged on.
Two schedules, same rates, different bills
Most firms quote a schedule that drops as balances rise. How the schedule is applied matters as much as the rates on it. Here is one fictional schedule, read two different ways.
| Balance | Rate |
|---|---|
| First $1 million | 1.00% |
| $1 million to $3 million | 0.80% |
| $3 million to $10 million | 0.60% |
| Above $10 million | 0.40% |
| How the schedule is applied | Annual fee on $5 million | Effective rate |
|---|---|---|
| Tiered: each slice pays its own rate, like tax brackets | $38,000 | 0.76% |
| Breakpoint: the whole balance pays the rate of the tier it reaches | $30,000 | 0.60% |
For a sense of the market: Kitces Research’s survey of advisory firms found a typical graduated schedule of about 1.00% up to $1 million, 0.75% at the $5 million tier and 0.60% at $10 million. Because the higher rates still apply to the first dollars, the blended fee works out closer to 0.85% on $5 million and 0.75% on $10 million. Those are typical numbers, not a standard, and they describe the fee alone.
Same rates on paper, $8,000 a year apart. Neither reading is wrong. Not knowing which one is in your agreement is. Ask which accounts count toward the balance, too: a spouse’s IRA, a trust and a child’s account billed separately can each restart at the top rate.
The ways advisors charge
Percentage of assets
The most common model. Usually tiered, with lower rates on larger balances. Simple, and it rises automatically as your money grows, whether the work does or not.
Flat annual fee
A set dollar amount for a defined scope of work. Easy to compare and easy to budget. Ask what happens when the scope changes.
Hourly or project
Pay for a plan or a decision, not ongoing management. Useful for a second opinion; thin if you want someone accountable over years.
Commissions
Paid by product companies when you buy something: annuities, insurance, some funds. Not automatically bad, but it means the advice and the sale come from the same person.
Many advisors combine these. That’s fine, as long as you can see every piece in one place.
The costs that never show up on the fee schedule
- Fund expenses inside mutual funds and ETFs, charged on top of the advisory fee
- Separate manager fees for specialized strategies, and platform or wrap fees from the custodian
- Commissions on insurance and annuities sold alongside the advice
- Low-yield cash sweeps, where uninvested cash earns far less than it could in Treasury bills
- Tax drag from frequent trading or from putting the wrong investments in the wrong accounts
Cash is where the quiet money is made. Many firms automatically sweep uninvested cash into bank deposit programs that can pay a fraction of what Treasury bills yield, and the firm or its affiliated bank keeps much of the difference. In January 2025 the SEC charged two Wells Fargo advisory firms and Merrill Lynch with compliance failures in their advisory cash sweep programs, and the firms agreed to pay a combined $60 million to settle. The SEC said the gap between those programs and other sweep options at times reached almost four percentage points. On $500,000 of cash, a few points of yield is real money every year. Ask what your cash earns, and who earns the rest.
Fund expenses stack on top. An advisory fee of 0.75% wrapped around funds that charge another 0.50% is a 1.25% relationship. Low-cost index funds and ETFs can cost a small fraction of that. In 2024, by the Investment Company Institute’s count, equity mutual fund investors paid an average of 0.40% a year and index equity ETFs averaged 0.14%. Those are averages; the gap between the cheapest and priciest options in the same asset class is often wider than the advisory fee itself.
Ask for one all-in number. The advisory fee plus fund and manager expenses plus anything else anyone is paid, in dollars, for your actual accounts. If the answer takes a week, that tells you something too.
And remember the fee isn’t deductible. Investment advisory fees used to be a miscellaneous itemized deduction for individuals. The 2017 tax law suspended it and the 2025 tax law made that permanent. Every fee dollar is an after-tax dollar.
Where the fine print lives
Every registered investment adviser files a Form ADV with the SEC or its state, and gives clients a plain-language brochure called Part 2A. Most people never open it. These are the sections worth ten minutes:
| Item | What it tells you |
|---|---|
| Item 5: Fees and Compensation | The fee schedule, how it’s billed, and whether you can negotiate |
| Item 9: Disciplinary Information | Legal and regulatory events the firm must disclose |
| Item 10: Other Financial Industry Activities and Affiliations | Affiliated brokers, banks, insurance agencies and funds, where conflicts tend to live |
| Item 12: Brokerage Practices | How trades are executed and whether the firm receives benefits from the custodian |
| Item 14: Client Referrals and Other Compensation | Who else pays the firm, and who the firm pays for referrals |
Form CRS, the short relationship summary, is the two-page version. Read both. A firm that hesitates to hand them over before you sign is telling you something. Look up any adviser’s filings
What’s negotiable at this level
- Breakpoints: whether rates drop as balances rise, and whether all family accounts count together
- Cash set aside for taxes or a near-term purchase. If someone bills you 1% on the money waiting to pay your tax bill, ask what they’re doing with it.
- Concentrated or illiquid holdings, such as rollover equity, that the advisor isn’t actively managing
- A flat fee instead of a percentage, when the work is mostly planning and coordination
A good firm will explain its pricing plainly and tell you what it will and won’t change. A firm that won’t discuss it at all is telling you how negotiations will go later.
What the fee should buy at $5 million and up
At this level, investment management alone is the minimum, not the service. The fee should cover the whole picture. This is the scope of every Morrowgate relationship:
- Investments built around what the money has to pay for
- One consolidated view of everything you own and owe, including accounts held elsewhere
- Tax planning worked out with your CPA before deadlines
- Estate coordination, so the documents and the accounts say the same thing
- Insurance and risk reviewed against what your family actually needs
- A cash plan, a giving plan and a plan for the next generation
- Someone who gets your CPA and attorney in the same room
If you’re paying for wealth management and getting a portfolio, you’re paying wealth-management prices for investment management.
How Morrowgate handles it: fees depend on the scope of work, and we put the cost and any account minimum in writing before you decide. The firm’s Form ADV Part 2A and Form CRS describe how it is paid and any conflicts; ask for both. How fees work
Questions owners ask
Are investment advisory fees tax-deductible?
Not for individuals. The deduction was suspended in 2018, and the 2025 tax law made that permanent.
What is a wrap fee?
A single fee that bundles advice, trading and custody. Firms that sponsor wrap programs describe them in a separate brochure attached to Form ADV. The question is the same as with any fee: what does it total in dollars, and what’s inside it.
Do fees come out of the account automatically?
Usually, quarterly, with the amount shown on the custodian’s statement. That convenience is exactly why so many families never notice the total.
Is a lower fee always better?
No. A low fee for a portfolio alone can cost more than a fair fee for planning that saves real tax or prevents a real mistake. The comparison is the fee against what it buys, in dollars.
Where this guidance stops
This article is general education on wealth management fees: how the rules and the options generally work. It is not tax, legal or investment advice, and nothing here is a recommendation for your situation. Rules change and outcomes turn on the facts, which is why a CPA and an attorney look at a family’s own numbers before anything is done.
Sources
- SEC Investor.gov: Form CRS, the relationship summary
- SEC: Investment Adviser Public Disclosure
- SEC: Form ADV Part 2 instructions
- SEC: Charges against Wells Fargo and Merrill Lynch over cash sweep programs (January 2025)
- Investment Company Institute: Trends in the expenses and fees of funds, 2024
- Kitces: How financial advisors charge for their services