Financial Advisor Adam Grossman: The One Fee Structure That Saves Wealthy Investors Thousands

Adam Grossman, the Boston-based fiscal advisor who founded Mayport, sat down with Christine Benz connected Morningstar's The Long View and challenged the mode astir Americans wage for concern advice. His argument: the modular 1% of assets nether absorption interest is an manufacture wont maintained for decades, untethered from the existent outgo of the work.

"There isn't a full batch of difference, successful my opinion, successful managing a portfolio that has, say, $2 cardinal versus a portfolio that's $3 oregon $5 oregon adjacent $10 million." If Grossman is correct, a affluent capitalist paying a percent of assets funds enactment that does not exist.

Quick Read

• A 1% assets nether absorption interest connected a $5 cardinal portfolio costs $50,000 annually compared to $8,000-$15,000 for flat-fee advisors, a quality that compounds to astir $1.1 cardinal implicit 20 years astatine 6% existent returns.

• The AUM pricing model, rooted successful 1970s commission-based banal picking, nary longer reflects the existent enactment required successful 2026 erstwhile astir portfolios usage low-cost scale funds and software-driven rebalancing.

• A caller survey identified 1 azygous wont that doubled Americans’ status savings and moved status from dream, to reality. Read much here.

The stakes are concrete. A 1% AUM interest connected a $5 cardinal portfolio is $50,000 a year. On a $10 cardinal portfolio it is $100,000 a year. A flat-fee advisor typically charges betwixt $8,000 and $15,000 annually. The quality is existent wealth that either stays successful the relationship oregon leaves.

Read: Data Shows One Habit Doubles American’s Savings And Boosts Retirement

Most Americans drastically underestimate however overmuch they request to discontinue and overestimate however prepared they are. But information shows that people with 1 habit person much than treble the savings of those who don’t.

The mathematics is not subtle

The AUM exemplary made consciousness successful 1975, erstwhile advisors picked idiosyncratic stocks, rebalanced by hand, and earned commissions connected each trade. It makes acold little consciousness successful 2026, erstwhile astir advisors physique portfolios from low-cost scale funds and rebalance with software.

"If an accountant looked astatine someone's income and saw that their income had gone up and past tried to summation their interest proportionally, past they astir apt wouldn't get distant with it. But the concern manufacture does get distant with it." An accountant filing a instrumentality for a household earning $300,000 does not complaint 10 times what they complaint a household earning $30,000. Investment absorption scales similarly.

Consider a hypothetical retiree with a $4 cardinal portfolio. Under a 1% AUM model, the yearly interest is $40,000. Under a $10,000 level fee, the redeeming is $30,000 a year. Reinvested astatine a 6% existent return, that yearly $30,000 quality compounds into astir $1.1 cardinal implicit 20 years.