More advisors are moving to an annual rate, or retainer fee, for more stable pay and a compensation structure aligned with the industry’s shift toward planning-led advice, an Envestnet study found.
While the majority of advisors, 62%, still use an AUM-based fee model to charge clients, a growing number have said they now charge a retainer fee. In 2023, only 14% of advisors offering financial planning services said their compensation model was an annual retainer, while 38% said the same in the 2026 State of Financial Planning Fees study.
Over the three-year period, the percentage of advisors using an AUM-based fee remained flat, at 62%, the study revealed. Since 2023, the average annual retainer fee for advisors also increased 52%, from $4,484 to $6,815, according to this year’s survey, which was prepared by Datos Insights and included responses from 491 financial advisors.
A retainer allowed advisors to “guard against fluctuations in the financial markets,” while allowing clients “expense predictability,” even in instances when their investment portfolio outperformed, Envestnet’s head of billing development, Seth Johnson, noted in an online post about the study.
Steady Income Through Market Changes
Lisa Kirchenbauer, president, founding partner and senior advisor at Omega Wealth Management in Arlington, Va., said that, on the advisor side, retainers can create “a more steady level of income.”
“I’ve been able to test that in several down markets. There is something to be said about not having huge variations in your income, especially at a time when you don’t want to lay off people,” if markets are down, Kirchenbauer said.
She has seen that younger advisors often enter the industry more comfortable charging for planning, due to the benefit of college programs dedicated to this area of finance.
“They were trained to be financial planners, see the value in it, and they are comfortable charging for it. When I came up, there weren’t these financial planning programs,” she said. For clients, a retainer can offer them more transparency, and costs that aren’t hidden behind investment management fees, Kirchenbauer added.
Retainers may be attractive to different types of clients, like those whose assets may be tied up in a company 401(k) or company stock — or wealthy investors who want more control over their investments but more planning advice, she said.
“They are trying to figure out, can we retire, how much will we need to retire, do we need insurance, or do we have our estate planning in order? There are so many questions they may need answers to, but the average advisor may still be looking at their AUM — how much you’re bringing over for me to manage,” Kirchenbauer said.
