10.9.1. Investment Advisory Fees
The most basic rule about an investment adviser’s fee, but also the most unclear, is that an adviser’s fee must not be unreasonable. This means that the fee should not too greatly exceed what other advisers charge for the same services. It also should not vary greatly from what that adviser charges its other clients for the same services.
Investment advisers are generally paid a percentage of assets under management (AUM). For instance, if a client has an account of $1 million dollars, and the investment adviser is being paid 1% of the assets under management, the adviser would be paid $10,000 annually. Investment advisers typically are paid usually between 1% to 2% of a clients’ assets under management. This arrangement means the adviser gets paid regardless of whether the account goes up or down, but they are paid a little more if the account increases in value and they ar