When it comes to managing wealth, many people wonder how wealth managers make money. It’s a valid question, as understanding the ways in which they earn their income can help investors make more informed decisions. In this comprehensive guide, we will explore the various ways that wealth managers generate revenue and provide insights into this often misunderstood industry.

Do Wealth Managers Make Money?

Wealth managers generate income through various means, each of which contributes to their overall revenue stream. Here are the main ways wealth managers make money:

1. Wealth Management Fees

Wealth managers typically charge clients a percentage-based fee on the assets they manage. This fee often ranges from 1% to 2% of the total amount managed. It is calculated as a percentage of the client’s portfolio value and can vary depending on factors such as the level of service provided and the complexity of the investment strategy.

2. Commissions on Trades

Some wealth managers earn commissions on the trades they execute on behalf of their clients. These trades can include buying or selling stocks, bonds, mutual funds, or other investment products. The commissions earned can vary, and it’s essential for investors to understand the potential conflicts of interest that may arise from commission-based compensation.

3. Performance-Based Fees

In certain cases, wealth managers may earn performance-based fees. This type of fee structure means that the manager receives a percentage of the profits generated above a certain benchmark or hurdle rate. Performance-based fees can provide an incentive for wealth managers to strive for excellent investment performance, aligning their interests with those of their clients.

4. Referral Fees

Wealth managers may receive referral fees from other professionals, such as attorneys or accountants, for introducing clients to their services. While referral fees can be a way for wealth managers to expand their client base, it’s essential for potential clients to understand any financial incentives involved and consider whether the referral genuinely aligns with their best interests.

5. Wrap Fees

A wrap fee is a comprehensive charge that covers both the investment management services and transaction costs. Wealth managers may charge their clients wrap fees, which allow investors to avoid individual transaction charges. This fee structure can simplify the investment process and provide transparency in the overall cost of wealth management services.

6. Custodian Fees

When wealth managers hold their clients’ assets with a custodian, such as a bank or brokerage firm, they may receive custodian fees. These fees are often a percentage of the assets held and compensate the wealth manager for the administrative tasks involved in managing client accounts.

7. Financial Planning Fees

Wealth managers may charge separate fees for financial planning services. These fees are typically based on an hourly rate or a fixed fee for completing a specific plan. Financial planning services can include retirement planning, tax planning, estate planning, and more. Clients who require comprehensive financial planning assistance can benefit from working with wealth managers who offer these services.

8. Account Maintenance Fees

Some wealth managers charge account maintenance fees to cover the costs associated with managing client accounts. These fees can include administrative expenses, technology costs, reporting, and other overhead expenses. Account maintenance fees are often charged as an annual percentage of the assets under management.

9. Alternative Investments

Wealth managers may have access to alternative investment opportunities that are not available to individual investors. By offering these unique investments, such as private equity or hedge funds, wealth managers can earn fees or a share of the profits generated from these investments. Alternative investments can provide diversification and potentially enhance overall portfolio returns.

10. Estate Planning and Trust Fees

Wealth managers who specialize in estate planning may charge fees for their expertise in creating and managing trusts, executing wills, and establishing other estate planning strategies. These fees can be charged based on the complexity of the estate and the services provided.

11. Annuities and Insurance Products

Wealth managers who are licensed insurance agents may earn commissions or fees for selling annuities or insurance products to their clients. While not all wealth managers offer insurance products, some provide these options as part of an overall financial plan.

12. Outsourced Services Charges

Wealth managers may charge fees for outsourcing certain services, such as tax preparation or legal advice, to external professionals. These fees cover the cost of coordinating these services and ensuring that clients receive comprehensive financial advice.

13. Succession Planning Fees

Wealth managers who specialize in business succession planning may charge fees for developing and implementing strategies to transfer ownership and control of family businesses. These fees can vary depending on the complexity of the succession plan and the services required.

14. Tax Planning and Preparation Fees

Wealth managers who have expertise in tax planning and preparation may charge fees for these specific services. This can include advising clients on tax-efficient investment strategies, identifying deductions and credits, and preparing tax returns. Tax planning can help clients minimize their tax liabilities and optimize their overall financial situation.

15. Asset Under Management Fees

Asset under management (AUM) fees are charged based on the total value of assets that a wealth manager manages for a client. These fees are often calculated as a percentage of the AUM and can provide a consistent revenue stream for wealth managers as the client’s portfolio grows.

16. Educational Resources and Consulting Fees

Wealth managers may charge consulting fees for providing educational resources, such as workshops or seminars, to their clients. These fees can cover the costs of organizing and presenting valuable educational material on financial topics.

17. Wealth Management Products

Wealth managers may also generate income by offering their own branded investment products, such as mutual funds or exchange-traded funds (ETFs). By creating and managing these products, wealth managers can earn management fees and benefit from the performance of the underlying investments.

18. Financial Education Programs

Wealth managers may offer financial education programs to their clients, either as part of their service offering or as a separate fee-based service. These programs can provide clients with the knowledge and skills to make informed financial decisions, empowering them to take control of their long-term financial well-being.

19. Socially Responsible Investment Management

Wealth managers who specialize in socially responsible investing may charge fees for managing portfolios that align with clients’ values and ethical considerations. These fees compensate wealth managers for the additional research and analysis required to construct socially responsible investment portfolios.

20. Exclusive Investment Opportunities

Wealth managers may have access to exclusive investment opportunities that are not readily available to individual investors. These opportunities can include private placements, venture capital investments, or pre-IPO shares. By providing access to these exclusive investments, wealth managers can earn fees or a share of the profits generated.

21. Foreign Exchange Trading Commissions

Wealth managers who engage in foreign exchange trading on behalf of their clients may earn commissions on these transactions. Currency trading can provide diversification and potential profit opportunities, and wealth managers can earn income by facilitating these trades.

22. Corporate Advisory Fees

Wealth managers with expertise in corporate finance or mergers and acquisitions may offer advisory services to businesses. These services can include assisting in capital raising, restructuring, or transaction advisory. Corporate advisory fees compensate wealth managers for their strategic advice and guidance.

23. Family Office Services

Wealth managers who offer family office services to high-net-worth clients may charge fees for overseeing various aspects of their financial affairs. Family office services can include investment management, tax planning, estate planning, philanthropy management, and other personalized services tailored to the specific needs of wealthy families.

24. Philanthropic Services

Wealth managers who specialize in philanthropic planning can earn fees for advising clients on charitable giving strategies. These fees can cover the costs of developing philanthropic plans, researching charities, and managing the distribution of charitable donations.

Frequently Asked Questions

1. What is the average fee charged by wealth managers?


The average fee charged by wealth managers varies depending on factors such as the size of the portfolio, the complexity of the investment strategy, and the level of service provided. However, a common fee range is approximately 1% to 2% of the assets under management.

2. Are wealth managers required to disclose their fees to clients?


Yes, wealth managers are legally obligated to disclose their fees to clients. This ensures transparency and allows clients to make informed decisions regarding their investments. Clients should review the fee structure carefully and ask for clarification if needed.

3. Are performance-based fees common in the wealth management industry?


Performance-based fees are less common in the wealth management industry compared to other financial sectors. However, some wealth managers may offer performance-based fee structures to incentivize strong investment performance.

4. Can I negotiate the fees charged by a wealth manager?


Yes, it is possible to negotiate the fees charged by a wealth manager. Many wealth managers are willing to adjust their fee structure based on the client’s needs and the level of assets under management. It’s essential to have open and transparent communication about fees during the initial discussions with a potential wealth manager.

5. Are there any potential conflicts of interest associated with wealth managers earning commissions?


Yes, earning commissions on trades can create potential conflicts of interest for wealth managers. It’s important for clients to understand whether their wealth manager operates as a fiduciary, meaning they must act in the best interests of the client, or if they are held to a suitability standard, which requires investments to be suitable based on the client’s circumstances.

6. Should I choose a wealth manager based solely on the fees they charge?


No, the fees charged should not be the sole determining factor when choosing a wealth manager. It’s essential to consider the wealth manager’s expertise, track record, investment philosophy, and the level of personalized service they provide. While fees are important, they should be evaluated in conjunction with the overall value provided by the wealth manager.


Understanding how wealth managers make money is crucial for investors seeking professional financial guidance. Wealth managers generate income through various sources, including management fees, commissions, performance-based fees, and other service charges. By comprehending the fee structure and potential conflicts of interest, investors can make more informed decisions and select the right wealth manager to meet their financial goals. Remember to evaluate factors beyond fees, such as the wealth manager’s expertise, track record, and level of personalized service, to ensure a comprehensive and suitable wealth management experience.