We’ve long argued that percentage-based charging is the biggest flaw in the financial advice industry. In the UK, regulation has largely moved us on from commission-led advice — and yet many advisers still cling to the idea that taking 1% of your investments every year is “normal.”
Across the Atlantic, the picture is even messier. Commission is still widespread, but the market is now discovering percentage charging — and finding its own problems with it.
A recent conversation on the Long View podcast with Eric Simonson, CEO of Abundo Wealth, was revealing. His firm runs entirely on an “advice-only” model: advisers are paid a transparent flat fee, not a slice of your portfolio. No commissions. No hidden incentives. Just advice.
The benefits are obvious.
- Clarity: clients know what they’re paying, and why.
- Fairness: the fee doesn’t balloon just because markets rise.
- Inclusivity: you don’t need half a million pounds before anyone will talk to you.
Simonson points out what we’ve seen ourselves: younger clients, especially, will not tolerate paying 1% of everything they own forever. They are comfortable with technology, they can click a button to buy a fund, but they still want planning and guidance. What they won’t accept is an outdated charging model designed to enrich the adviser, not the client.
So why does percentage charging persist? Inertia, certainly. And economics. Advisers like the idea that as markets grow, their revenue grows too — even if they do nothing more for the client. But “liking” something doesn’t make it fair.
The US is now where the UK was a decade ago: realising that commission and percentages are not the only models. Advice-only networks are springing up, connecting consumers to planners who charge like any other professional — a clear fee for a clear service.
It sounds radical, but it’s actually just common sense.
Imagine a world where you sit down with an adviser, agree what you need, and pay a fixed monthly fee for as long as you want their help. No more mental gymnastics over percentages, no more silent fee-drain on your wealth.
That world exists today. In fact, you don’t need to imagine it — you can find an adviser who works this way right here.