Why Advisors Must Evolve: Fee Compression Demands a ‘Three-Lane’ Approach

Jun 16, 2025 / By Debra Taylor, CPA/PFS, JD, CDFA
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The landscape of fees in financial advising is changing. You need to do a deep assessment of your services to ensure you can retain and attract the business of valuable clients. Here are some of the changes and the steps you can take to position yourself for growth.

In 2020, the average advisor charged 102 basis points for wealthy clients. By 2026, that figure is expected to drop to 66 basis points. What used to be a comfortable 1% is becoming an uncomfortable race to the bottom.

The landscape of financial advising is shifting, and fast. According to a 2025 Cerulli Edge U.S. Advisor study from Cerulli Associates, the traditional fee structures that many advisors have relied on are under increasing pressure. At the same time, client expectations are rising, especially among high-net-worth (HNW) individuals and the next generation of investors.

It’s a one-two punch: lower fees, higher demands.

For advisors, the path forward isn’t about retreating, it’s about expanding. To maintain margin and relevance in a changing market, advisors must go beyond single-lane guidance and deliver in all three key areas: investment management, financial planning, and tax and retirement distribution strategy.

Put simply: The more value you offer, the more valuable clients you attract.

At Carson Wealth, we call this the “Three-Lane Highway.” It’s how we help clients navigate their full financial journey, not just isolated parts of it.

Read below to discover more about what the Cerulli study says about the changing fee landscape and how our Three-Lane strategy can help you get ahead.

1. Fee compression is here

The new Cerulli study paints a clear picture of where the industry is headed. By 2026:

  • 83% of advisors expect to charge less than 1% for clients with over $5 million in investable assets.
  • The average fee for clients with $10 million or more is projected to fall to 66 basis points.
  • Advisory fees will dominate revenue, with 54% of advisors expected to derive at least 90% of their revenue from advisory fees, up from 44% today.

This shift isn’t just theoretical. It’s already unfolding.

Cerulli finds that asset-based fees for clients with $1.5 million or more have already fallen two basis points from 2020–2024, and are expected to dip again by 2026. As more clients become fee-savvy and platforms commoditize investment management, price sensitivity will only increase.

Cerulli also projects a continued shift away from commissions toward asset-based fees, while newer models like flat fees or subscriptions remain rare. Crucially, the research highlights a strong link between the breadth of services an advisory team provides and the average assets their clients bring. Cost remains one of the top factors clients consider when choosing a financial advisor.

Pro tip: Review your pricing structure annually against your earnings yield (revenue:AUM), service offerings, service matrix, and segmentation.

2. Clients expect more value for less

Perhaps even more striking than the fee data is what clients want in exchange. According to Cerulli, clients, especially HNW individuals, now expect a more holistic, planning-driven relationship. This includes:

  • Tax strategy
  • Estate and legacy planning
  • Medicare and Social Security guidance
  • Business succession planning
  • Charitable giving strategies

It’s not just about managing a portfolio. It’s about managing a life. This rising demand for comprehensive service creates what some are calling “value expansion.” Even if the advisor’s fee doesn’t change, the expectation is that more will be delivered within that fee. The result? Advisors must find ways to scale personalized service without sacrificing quality or profitability.

Pro tip: The advisor of the future must move beyond generalized services to deliver specialized expertise that resonates with specific client segments. Client needs are evolving from simple portfolio construction to outcome-based planning across multiple dimensions.

3. Building a resilient practice with the ‘Three-Lane Highway’

At our firm, we’ve long believed that clients want more than a one-lane plan. They need a coordinated, comprehensive strategy. That’s why we’ve structured our guidance around three interconnected lanes:

Click the image to view a larger version.

  • Investment management: Clients expect sound portfolio construction and oversight, that’s just table stakes. This includes managing retirement and brokerage accounts, aligning risk, and incorporating alternative investments. Technology and AI can support this lane, but it alone won’t set an advisor apart. True differentiation requires lanes two and three.
  • Retirement and financial planning: This includes retirement forecasting, Medicare optimization, and adaptable goal-based planning. This lane connects data with life decisions and is increasingly where the client relationship deepens.
  • Tax management and retirement distribution planning: This lane is rapidly becoming the true differentiator. It includes tax strategy, RMD planning, and estate coordination. As tax complexity rises and more clients focus on intergenerational wealth transfer, advisors who can guide in this area are positioned to attract and retain HNW relationships.

For example, one client with a multi-million dollar IRA came to us after receiving no tax guidance from a previous advisor. Within weeks, we built and began executing a Roth conversion and distribution strategy, demonstrating the value of a comprehensive, tax-forward approach.

To begin, audit your current services across the three lanes to spot gaps and opportunities.

Pro tip: Once you’ve identified gaps, differentiate through focused marketing and training. The investment in expertise pays off through better retention and higher-value clients.

4. Scaling the model without sacrificing service

So how can advisors deliver across all three lanes while managing fee pressure? Cerulli and industry leaders suggest a few key strategies:

  • Leverage AI and technology: Boost efficiency and client capacity. Early adopters gain productivity advantages that can reduce costs and improve margins.
  • Redefine the team model: Integrate tax pros, estate attorneys, and insurance specialists to expand value without overloading individual advisors.
  • Segment service delivery: Tailor your service model to align client complexity with team capacity and pricing tiers.

Pro tip: Scaling while keeping prices competitive and services personalized requires a thoughtful tech stack. Every platform you use should reinforce planning capabilities and client experience.

While fees may not be plummeting overnight, the trajectory is clear: Clients want more for less. Advisors who resist change risk being left behind.

The good news? Advisors who clearly communicate and deliver holistic value are best positioned to attract and retain high-value clients. Cerulli finds a strong correlation between advisors who offer broad services and those who manage higher AUM.

Put simply: The more value you offer, the more valuable clients you attract.

We’ve seen firsthand how the “Three-Lane Highway” can help advisors stand out, build trust, and grow their practices. It’s not about doing more for less. It’s about doing the right things, in the right way, for the clients who value them most.

Three lanes. One journey. That’s the road to long-term success.

Debra Taylor, CPA/PFS, JD, CDFA, an industry leader and sought-after speaker with 30 years of experience, is Horsesmouth’s Director of Practice Management. She is Chief Tax Strategist and Managing Partner with Carson Wealth Management. She was the principal and founder of Taylor Financial Group, LLC, a wealth management firm in Franklin Lakes, NJ. Debra has won many industry honors and is the author of My Journey to $1 Million: The Systems and Processes to Get You There, a book about industry best practices. Debbie is also a co-creator of the Savvy Tax Planning program and leader of the Savvy Tax Planning School for Advisors. Several times a year she delivers her Build a Better Business Workshop for advisors.

Comments

I am surprised your article did not mention annual retainer fee model.

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