According to WealthManagement, many financial advisors feel trapped in a system where basis points (bps) increase their costs without a corresponding boost in value. Platform and program fees tied to advisors' assets under management (AUM) are a prime example of this imbalance.

Consider an advisory practice with $30 million in AUM that doubles to $60 million. The fees rise from $69,000 to $102,000, but the value of services remains the same. WealthManagement says that the platform does not contribute to marketing, sales, or client acquisition, leaving advisors questioning what these escalating costs truly represent.

Revenue-sharing models compound the issue, particularly when compliance costs disproportionately impact higher-producing advisors. WealthManagement shares the example of a $100,000 advisor might pay $10,000 in compliance fees—a fair percentage relative to oversight costs. However, a $1 million advisor paying $100,000 for the same services highlights inefficiencies, as the compliance burden doesn't scale with AUM. In this structure, larger advisors effectively subsidize smaller ones.

The financial industry often adheres to legacy fee structures because "it is how things have always been done."

In the end, platforms like broker-dealers, hybrids, and RIAs will design fee models that maximize their profitability. Advisors, however, retain the authority to evaluate whether those structures truly serve their business interests.

Financial Advisor Transitions consults advisors nationwide to explore employment transition options and to preserve and protect their practice in any transition that they make.