More Than 75% of Advisors Will Work off Fees by Next Year

As a Pretty Woman once said: “You work on commission, right? Big mistake. Huge!”

More than three-quarters of the wealth management industry is expected to operate on fee-only models by 2026, according to a new Cerulli report. The shift comes as advisors double down on financial planning instead of just portfolio management and other product-based services, like insurance. Commission-based compensation structures are used by only 23% of advisors today.

“The benefits [of fees] for both the advisor and client are that they are essentially now sitting on the same side of the table and can equally benefit from the growth of a portfolio,” said Kevin Lyons, Cerulli senior analyst. 

Death of a Salesman

Plenty of advisors have ditched commission structures for ethical reasons, citing conflicts of interest and fiduciary standards. “It doesn’t create a good environment for a client or for the advisor,” said Kyle Harper, who recently started his own RIA, Harper Financial Planning. Harper said he left his previous role at a firm that operated on a hybrid structure of fees and commissions.

Commission-based structures’ role in the industry — and how much revenue they generate — has greatly declined in recent years: 

• Today, asset-based fees are the most popular kind of fees, representing more than 72% of advisors’ compensation. Meanwhile, commissions account for less than 25%, according to Cerulli.
• By next year, a little over half of advisors will be “primarily fee-based,” meaning 90% or more of their business operates on fees. In contrast, just 1% of advisors are expected to be commission-only in 2026.

Fees vs. Commissions. Many clients, especially millennials, are skeptical of advisors who work on commission, said John Bell, who runs Free State Financial Planning. “As a client, how do you truly know they are acting in your best interest, specifically if they are beholden to their company products?” he told Advisor Upside, adding that fees provide clients with greater transparency.

However, Bell goes one step further than fee-only, offering advice-only services at a flat rate. He argued the “we make money when you make money” mantra of asset-based fees is disingenuous. “Are they doing more work for you when you have a $500,000 vs. a $5 million portfolio?” he said. “They might be doing more, but I don’t believe they should be compensated almost 10 times more.”