Asset-based fees remain dominant, fixed and hourly models gaining ground among RIAs

Asset-based fees continue to dominate the compensation landscape for RIAs, but the latest data from the Investment Adviser Association show that advisers are increasingly adopting a mix of fee structures to serve a broader range of clients.

According to the IAA's 2025 Industry Snapshot report, 95.5% of SEC registered investment advisers offered a fee based on a client’s assets under management in 2024, consistent with previous years.

However, only 17.4% of advisers relied solely on asset-based fees. The majority – 78.1% – combined asset-based fees with other arrangements, such as fixed, hourly, or performance fees.

Nearly half of advisers, 49.9%, offered a fixed fee or an hourly fee, or both, with these models especially prevalent among firms providing financial planning services. More than 85% of advisers offering financial planning used fixed or hourly fees.

“Compensation structures for advisory services align advisers’ interests with their clients’ interests," the IAA snapshot report said. "Through asset-based fees and performance fees, advisers link their compensation to the success of their clients’ investments.”

Over 94% of advisers had discretionary authority to manage client portfolios in 2024, which the IAA said allow them to make ongoing investment decisions on behalf of clients.

The most common fee combination involved fixed or hourly fees alongside asset-based fees, a structure used by 34.8% of advisers. These fees are often charged for discrete, one-time services, such as developing a financial plan.

The next most common arrangement was an asset-based fee paired with a performance fee, offered by 23.7% of advisers. This model is particularly prevalent among advisers managing private funds, where 58.1% were compensated solely through asset-based and performance fees in 2024.

A recent report by Cerulli found slightly more than half of independent financial advisors (54%) expect at least 90% of their revenue will come from advisory fees by 2026. The number of advisors getting compensated on a mixed fee-and-commission basis is also expected to decline as the industry shifts from transactional business models to more fee- and relationship-driven services.

The IAA snapshot also found that in 2024, a tiny 4.7% minority of advisers did not offer asset-based fees. Despite their size, the IAA said those firms served nearly one-quarter of the industry’s non-asset management clients and over one-fifth of non-high net worth clients. More than half of these advisers offered fixed or subscription fees, a model that has become increasingly common among large digital advice platforms.

The largest firms not charging asset-based fees typically used cost or “cost-plus” reimbursement arrangements, especially when affiliated with other entities such as brokerage firms.

“Cost or cost-plus arrangements are most common among affiliated entities. For example, an investment adviser provides asset allocation advice for an investment program managed by an affiliated brokerage firm. For providing these services, the investment adviser receives a fee from the brokerage firm that equals its costs plus a fixed percentage,” the report states.

Trends over the past 24 years show a marked increase in the use of performance fees, up 13.7% since 2000, though their use has declined in the past decade outside the private fund space.

Fixed fees have also grown in popularity, rising 9% since 2000, with digital advice platforms contributing to this shift. Meanwhile, commissions have steadily declined, falling 10% over the same period.