Thinking about working with a financial planner is an exciting milestone, but figuring out how much it costs can feel surprisingly complicated. Money is deeply personal, and how you choose to invest it should reflect your values, not eat away at your long-term growth through hidden or compounding fees. Knowing where your money goes gives you total clarity as you navigate your financial picture.
Understanding the two main financial planning fee models
When you look into hiring a financial planner, you'll quickly discover that the two most common ways financial planners are paid are the Assets Under Management (AUM) model and the flat-fee model.
Both structures deliver professional guidance, but the way they calculate your bill is fundamentally different. One charges you based on the size of your investment nest egg, while the other charges a set fee for the services you actually receive.
The AUM model explained
In an Assets Under Management (AUM) model, the financial planner assesses fees based on a set percentage of your portfolio. The specific percentage can vary, but it's commonly close to 1% of assets.
This fee structure means that as your portfolio grows, so can the amount paid to your financial planner. This is true even when the amount of work required to manage your portfolio remains relatively constant over time.
Because compensation in the AUM model relies on total managed assets, it creates a dynamic where the financial planning firm can be incentivized to gather and grow assets under management. Since the financial planning firm can earn more compensation from larger accounts, they may spend more of their time servicing their highest net worth clients. This dynamic means it can also be difficult for less wealthy individuals to become clients of AUM-based financial planning firms, as many set high account minimums to qualify for their services.
The flat-fee financial planning model explained
Within a flat-fee model, the financial planner charges a set annual amount that does not grow with your assets, but can change based on services offered.
Under the flat-fee model, a financial planner may offer a tiered-pricing structure, allowing clients to select the tier that most closely corresponds to their planning needs. Annual pricing for flat-fee financial planners can often range between $2,000/year and $9,000/year, depending on the services offered.
Because this service model is not based on the level of your assets, those without significant savings or assets, or those earlier in their financial journey, can gain access to financial planning services. For those with significant assets, a flat-fee model may bring significant cost-savings when compared to the AUM service model.
Furthermore, as flat-fee financial planners are not compensated on assets under management, they may focus less on gathering assets, and more on holistic financial planning needs. This holistic support may encompass topics such as:
- Cash flow and debt management
- Education savings strategies
- Home buying guidance
- Family planning
- Tax planning
- Estate planning
- …As well as investment management and allocation
Cost comparison: $500,000 portfolio over 20 years
To see how these two fee models could play out in real life, let's look at a side-by-side comparison over a 20-year time horizon with an assumed investment growth rate of 7% per year.
For this analysis, we assume a 1% fee for the AUM model and a constant $5,500 annual fee for the flat-fee model.
| Metric | 1% AUM Model | $5,500 Flat-Fee Model |
|---|---|---|
| Starting Portfolio | $500,000 | $500,000 |
| Year 1 Fee | $5,000 | $5,500 |
| Total Fees Paid (20 Years) | $182,549.90 | $110,000 |
| Ending Account Balance | $1,582,520 | $1,693,583 |
| Potential Flat-Fee Savings | -- | $111,063 |
Over 20 years, choosing a flat-fee model saves a potential $111,063 in total account balance compared to the 1% AUM model, leaving significantly more money in your account to support your personal financial journey.
Cost comparison: $1,000,000 portfolio over 20 years
The difference becomes even more dramatic as your portfolio grows larger. Using the exact same assumptions, 1% AUM versus a $5,500 annual flat fee, 7% annual growth, and a 20-year horizon, here is how the math breaks down on a $1,000,000 starting portfolio:
| Metric | 1% AUM Model | $5,500 Flat-Fee Model |
|---|---|---|
| Starting Portfolio | $1,000,000 | $1,000,000 |
| Year 1 Fee | $10,000 | $5,500 |
| Total Fees Paid (20 Years) | $365,099 | $110,000 |
| Ending Account Balance | $3,165,041 | $3,628,425 |
| Potential Flat-Fee Savings | -- | $463,384 |
In this scenario, paying a flat fee results in a potential savings of $463,384 over two decades. Because the flat fee doesn't scale up with your account growth, hundreds of thousands of dollars stay invested in your portfolio to compound for your future.
These hypothetical models are provided for illustrative purposes only and do not represent actual performance or individual client results. Calculations assume an initial portfolio balance of $500,000 and $1,000,000, an unvarying annual gross investment return of 7.0%, annual fee deductions, and no additional deposits or withdrawals over a 20-year horizon. The flat-fee model assumes a constant annual fee of $5,500 deducted annually from portfolio assets; actual flat-fee pricing typically ranges from $2,000 to $9,000+ per year based on complexity and tier, and may adjust over time. The AUM model assumes an ongoing fee of 1.0% of assets under management calculated and deducted annually. These projections do not reflect the deduction of underlying fund expenses (such as ETF expense ratios), trading commissions, taxes, or inflation. Investments are subject to market risk, including the loss of principal. Past performance is no guarantee of future results.
Is a financial planner worth it if you aren't wealthy yet?
There is a common misconception that professional financial guidance is only for the super-wealthy or those who have already accumulated a $500,000+ portfolio. Under the traditional AUM model, this was often true due to strict minimum asset requirements.
However, the flat-fee model completely changes this dynamic. Because pricing is decoupled from your total portfolio balance, you don't need a million dollars to get high-quality financial planning. If you are earlier in your financial journey, a flat-fee financial planner can help you navigate important early-stage decisions like paying off debt, saving for a home, optimizing employer benefits, and starting your investment roadmap.
Evaluating the overall value of your financial planning relationship
While comparing numbers is essential, cost is only one half of the equation. Any financial planning relationship needs to be evaluated not only on the annual cost, but also on the value of services provided.
A lower fee may only be beneficial if you receive comprehensive guidance that matches your life goals. When evaluating whether a financial planner is worth the cost, consider the breadth of their expertise across your whole financial life, from taxes and estate planning to cash flow and lifestyle goals, rather than focusing solely on portfolio management.
The Facet difference
At Facet, we believe high-quality financial planning should be accessible to everyone, not just those with assets to invest. That's why we operate on a flat-fee membership structure instead of taking a percentage of your hard-earned assets.
Our members work directly with CFP® professionals who deliver objective guidance tailored to their life goals. By eliminating asset-based fees and account minimums, your financial planning roadmap focuses entirely on helping you achieve what you want out of your money with long-term clarity, giving you confidence that every dollar works toward what matters most to you.
Hypothetical examples are strictly for educational and illustrative purposes and do not represent actual client performance. Facet charges an annual flat membership fee based on planning complexity, which is separate from underlying exchange-traded fund (ETF) expense ratios, third-party platform costs (such as wealth.com for estate planning), or custodial charges. Certain specialized strategies, such as Direct Indexing (available on the Complete Tier), require specific account minimums.
