What the AUM model is actually paying for
The dominant pricing model in U.S. wealth management is a percentage of assets under management, typically 0.75% to 1.25% per year, sometimes higher at smaller account sizes, sometimes lower above $5M. On a $2M portfolio, this works out to $15,000 to $25,000 annually. On a $5M portfolio, $40,000 to $60,000.
The structural feature of this pricing is that it is uncorrelated with the work performed. A wealth manager who actively reviews and rebalances a portfolio weekly earns the same fee as one who reviews it quarterly. A wealth manager who builds a detailed asset-location architecture for a new client earns the same fee as one who places the entire portfolio in a single target-date fund. The fee is paid on what the client owns, not on what the advisor does.
This isn't necessarily a problem, different fee models suit different engagements. But the AUM model has a specific implication that's worth being explicit about. The advisor's economic interest is in keeping the assets under management and growing them over time. The work that gets prioritized, structurally, is the work that retains and grows the assets: portfolio construction, performance reporting, relationship management, and the kind of light-touch financial-planning conversation that keeps the client comfortable.
What's deprioritized, structurally, is the work that takes assets out of management. Roth conversions reduce future taxable-account fees. Charitable structures move assets to DAFs that may not be managed by the AUM advisor. Estate gifting strategies remove assets from the household balance sheet entirely. Cost segregation studies for real estate holdings have no AUM-fee implication at all. These are exactly the moves that the AUM model is least incentivized to surface, even when they are the right answer for the client.
What "comprehensive planning" usually means
Almost every wealth manager's website includes some version of the phrase "comprehensive financial planning." The language is industry-standard. What it actually describes varies enormously between firms.
At one end of the spectrum, "comprehensive planning" means a thorough initial financial-plan document, typically 30 to 80 pages, produced in the first 60 days of engagement, reviewed annually, and used as a backdrop for ongoing portfolio conversations. The plan covers retirement projections, life-insurance review, estate document inventory, and goal modeling. It is real work. It is also, fundamentally, a deliverable produced once and refreshed lightly thereafter. The ongoing engagement remains focused on portfolio management, with the plan as context rather than as work.
At the other end of the spectrum, "comprehensive planning" means something closer to what coordinated advisory actually delivers, continuous integration across tax, retirement, wealth, and estate, with each decision in any domain checked against the others. This kind of engagement exists; it is rarer than the label suggests; and it is almost never priced on an AUM basis because AUM economics don't support the depth of ongoing work it requires.
The honest version: the phrase "comprehensive planning" has, in most uses, drifted from describing continuous integration to describing the produced-once financial-plan document. Both kinds of engagement use the same label. They are not the same product. The fee structure is usually the most reliable signal for which one is actually being delivered.
The two models, side by side
The deepest comparison is in what each model produces over a full engagement lifecycle, and how the incentives shape the work that actually gets done.
| AUM Wealth Manager | Coordinated Advisor (MicroTax) | |
|---|---|---|
| Fee basis | Percentage of assets managed | Scope and work performed |
| Annual cost on $2M portfolio | $15K–$25K | Calibrated to engagement scope |
| Annual cost on $5M portfolio | $40K–$60K | Same fee as $2M (work doesn't scale with assets) |
| Primary work | Portfolio construction & management | Integrated tax, retirement, wealth, estate |
| Tax planning depth | Loss harvesting; rare strategic work | Year-round proactive tax design |
| §7702 capability | Sometimes, usually product-led | Specialist-led, integrated |
| Estate coordination | Refer to attorney, then disengage | Owned architecture; partner-attorney drafting |
| Charitable structure design | Light-touch; DAFs sometimes | DAFs, CRTs, direct-asset gifting designed |
| Incentive to recommend Roth conversion | Weak (reduces future AUM) | Neutral |
| Incentive to recommend gifting out of estate | Weak (removes assets from AUM) | Neutral |
| Cadence of engagement | Quarterly portfolio reviews | Continuous integration; quarterly minimum |
This table compares engagement structures, not individual practitioners. Many AUM-fee wealth managers do thoughtful coordinated work despite the fee misalignment. The structural argument is about what the model produces by default, not about what individual advisors are capable of.
1.0%
Typical AUM fee on $2M portfolio
$20,000
Annual fee, paid quarterly
Moving $500K out of taxable brokerage into a §7702 vehicle would reduce the advisor's annual fee by $5,000. The structural disincentive is real.
This isn't the wealth manager's fault
The argument so far might read as a critique of wealth managers. It isn't. As with the parallel argument about CPAs, it's worth being precise about why.
The AUM model emerged for legitimate reasons. It aligned advisor compensation with client portfolio growth, when the portfolio grew, the advisor earned more; when it shrank, the advisor earned less. This was a meaningful improvement over commission-based brokerage compensation, where every trade generated a transaction fee regardless of whether the trade benefited the client. The AUM model converted a transactional relationship into a fiduciary one. That conversion was, structurally, a good thing.
The model also makes economic sense at scale. A wealth manager serving 80 client households cannot deliver continuous integration across tax, retirement, wealth, and estate for every household, there are not enough hours. The AUM model is calibrated to a portfolio-management workload, which is what the available hours can support. Asking a wealth manager paid 1% of $2M to do the work of a full coordinated advisory engagement is asking them to do something the economics doesn't permit.
What MicroTax exists to do is the work that the AUM model isn't economically structured to produce, not because wealth managers are unwilling, but because the model isn't built for it. The strategic and tactical work runs through us; portfolio management can run through us, through a partner wealth manager, or through the client's existing advisor. The structural distinction is the point. Two different models, each suited to a different kind of work. Most high earners benefit from both.
What the incentives actually produce
The most consequential effect of the AUM fee structure isn't on the advisor's behavior in any single decision. It's on which advisors a client ends up working with over time, and what kinds of conversations become normalized in those relationships.
Consider the structural reality of three common high-leverage moves: a large Roth conversion in a low-income year, a substantial charitable gift via DAF or CRT, and an estate-gifting strategy that moves $5M out of the parent generation to a generation-skipping trust. Each of these moves, executed correctly, has an enormous after-tax benefit to the client and the client's family. Each of them, executed correctly, also moves assets out of the wealth manager's AUM base, permanently, in the case of the gifting strategy.
A wealth manager paid 1% of AUM has no positive economic incentive to surface these moves. They are not paid to identify them. They may not have the technical depth to design them. And the firms they work for, whether wirehouses, RIAs, or hybrid advisors, generally compensate based on AUM growth and retention. The advisor who proactively shrinks the AUM base for client benefit is rewarded with smaller compensation.
None of this means individual wealth managers won't surface these moves. Some do. The thoughtful ones do, in spite of the structural disincentive. But the model itself is calibrated against the work, and the median engagement reflects that calibration. The honest framing is: the AUM model produces an engagement where the advisor's recommendations correlate, on average, with what keeps the assets in management, not necessarily with what's best for the client across the full picture.
The fee structure isn't a guarantee about what an advisor will do. It's a forecast about what kinds of work the engagement is economically built to sustain, and what kinds it isn't.
When the AUM model is the right answer
The AUM model is structurally well-suited to a specific kind of client: someone who wants a professional managing the investment portfolio, doesn't want to do that work themselves, isn't looking for deep planning integration, and is comfortable paying a percentage of assets for the portfolio management itself. For that client, the AUM relationship is exactly the right product. Many wealth managers in this category are excellent at the portfolio-management work, and the engagement delivers real value.
The AUM model is less well-suited to a different kind of client: someone with significant tax complexity, multiple advisor relationships, equity compensation, business interests, real estate holdings, or a planning horizon that includes meaningful future events. For that client, the AUM engagement may produce a reasonably-managed portfolio but leave most of the cross-domain integration work undone, because the model is not economically structured to do it.
The honest answer for most high earners is: keep the portfolio with a wealth manager you trust, if you have one, and add a coordinated advisor to do the work the AUM model isn't built for. The two engagements can coexist productively. The AUM manager owns the portfolio; the coordinated advisor owns the architecture. Each does what their model is calibrated to deliver.
How MicroTax works alongside your wealth manager
If you have a wealth manager you're happy with, that's not a reason to skip this conversation. Most of our engagements are structured as a coordinated layer alongside an existing wealth-management relationship, not as a replacement.
In practice, this looks like a defined handoff: MicroTax owns the integrated architecture, tax position, retirement design, estate coordination, charitable structure, projected outcomes across decades. The wealth manager continues to own the portfolio: asset allocation, security selection, rebalancing, performance reporting. We share data as needed, coordinate on year-end and pre-event moves, and respect each other's mandates.
Most wealth managers welcome the partnership. They understand that the coordination work isn't economically supported by their fee structure, and they appreciate having a partner whose job is to do that work. Some prefer not to coordinate, in which case we adjust accordingly, either by working around them, or by helping the client evaluate whether a transition makes sense. The choice is always the client's.