Overview of Debate: AUM vs Flat Fee — BiggerPockets Money podcast
This episode is a structured debate/interview where hosts Mindy Jensen and Scott Trench challenge Ryan Sterling (CEO, NerdWallet Wealth Partners) to defend the assets-under-management (AUM) advisory model versus flat-fee / advice-only financial planning. The conversation covers what financial planning should deliver, the different monetization models in the industry, core objections to AUM (cost, conflicts, client behavior), and Ryan’s rebuttals and real-world experience. Both hosts remain skeptical but acknowledge legitimate situations where AUM can make sense.
Who’s on the episode
- Hosts: Mindy Jensen and Scott Trench (BiggerPockets Money)
- Guest: Ryan Sterling, CEO of NerdWallet Wealth Partners (fee-registered investment advisory)
- Sponsors and promos also appear (Monarch, Pine Financial Group, Northwest Registered Agent, CarMax, LifeLock).
Core definitions & business models explained
- Financial planning (as Ryan describes it): a diagnostic + roadmap from current situation to goals; often paired with coaching (accountability, decision coaching) and investing (portfolio construction/management).
- Common monetization models:
- Hourly / project-based (advice-only)
- Flat fee / subscription (annual retainer; example range $2.5k–$7.5k+)
- AUM (percentage of assets managed; typical 0.25%–1% with sliding scales)
- Commissions (product sales: insurance, annuities)
- Hybrids: “fee-only” (often AUM) and “fee-based” (can include commissions)
Main objections to AUM (hosts / community)
- Total cost over time: AUM compounds as assets grow and can become far more expensive than a flat annual fee over decades.
- Conflicts of interest: AUM can incentivize advisors to encourage larger account balances, potentially prioritizing growth of assets over client-specific goals (e.g., paying off high-rate debt, investing in private deals or real estate, giving money away).
- Behavioral / transparency concern: Automatic fee deduction reduces the “pain” of paying and may blunt clients’ regular re-evaluation of the service. Flat fees are felt more directly and may force more rigorous assessment by clients.
Ryan Sterling’s defense of AUM — key points
- Service triad: planning + coaching + investing. AUM ties these together and encourages multi-year relationships.
- Transparency: NerdWallet Wealth Partners posts the fee on the first page of client statements; fees are taken quarterly and broken down by thresholds.
- Behavioral advantage: Ryan argues many clients (especially high-earner, non-FIRE-evangelists) will stop paying flat fees after year one even when they need ongoing help. AUM clients stay engaged, get long-term coaching, and show better outcomes.
- Access & scale: AUM firms often provide access to a broader set of investment strategies and tools (tax-efficient ETFs, alternative strategies, institutional products) valuable at higher asset levels.
- Fee structure choices: Ryan’s firm uses a graduated AUM schedule (lower rates as assets grow) and intentionally kept fees lower than many competitors.
- Practical experience: After experimenting with multiple fee models, Ryan found clients on AUM had better long-term outcomes than flat-fee clients who often stopped engaging after an initial plan.
- He still endorses low-cost, tax-efficient ETFs and says they are not “market timers.”
Illustrative numbers & scenarios mentioned
- Example AUM schedule (NerdWallet WP): 0.9% under $500k; lower breakpoints as assets grow (0.8% $500k–$1M; 0.7% $1M–$2.5M; etc.).
- Comparative thought experiment: flat fee of $7,500/year (rising with inflation) vs AUM at typical rates over 30 years. In the host’s sample projections:
- Starting with $500k: AUM fees ~ $330k over 30 years vs flat-fee total ~$225k
- Starting $1M: AUM ~ $520k vs flat-fee ~$225k (approx.)
- Starting $2M: AUM ~ $865k vs flat-fee ~$225k (Numbers are illustrative; depend heavily on returns, fee schedule, and client contributions.)
Host reactions & lingering concerns
- Mindy: Became more open to AUM after hearing Ryan (recognizes behavioral differences and transparency value), but emphasizes clients should "know what they pay."
- Scott: Praised Ryan’s answers but remains unconvinced he would hire an AUM advisor. Biggest sticking points: ethical discomfort with fees deducted passively, and potential conflicts (esp. with commission-based sellers, which he strongly dislikes).
- Both agree excellent planners exist in all fee models; poor planners exist too. Fee model alone isn't proof of competence.
Situations where AUM may make sense (takeaways)
- You want a long-term, hands-on relationship that keeps you accountable and prevents ad-hoc bad decisions (panic selling, poor timing).
- You’re early in the wealth-building journey (smaller balances) and don’t want the psychological friction of writing an annual check for advice — AUM may increase ongoing engagement.
- You're approaching retirement / decumulation and want an advisor actively managing sequence-of-return risk, cash-flow strategies, and access to institutional tools (for some clients, AUM’s scaling of fees can be advantageous).
- You value integrated planning + investing and expect your advisor to actively manage investments (not just provide a plan and walk away).
When flat fee / advice-only may be better
- You are financially competent, disciplined, and prefer to keep compensation fixed and predictable.
- You want minimal conflicts of interest and prefer to pay explicitly for advice, not have fees grow with your wealth.
- You plan to DIY investments or use low-cost robo/advisor platforms, and only want periodic planning and accountability.
Practical checklist for choosing an advisor (questions to ask)
- Which fee model do you use? (Be specific about rates, billing cadence, and fee breaks.)
- Exactly what does the fee include—planning, coaching, investment management, tax or estate help?
- Are fees shown on account statements? How are they deducted?
- Do you get billed on assets you don’t want managed (e.g., 401(k), rental property)? If so, how?
- How do you handle conflicts of interest? Are you able/refuse to earn commissions?
- What’s your investment philosophy (passive vs active) and what access do you provide to institutional strategies?
- How often will we meet and how is accountability enforced?
- Can you show client outcomes or case studies (anonymized) demonstrating how clients with similar profiles fared?
- If I grow beyond X assets, how will your approach or fees change?
Notable quotes / soundbites
- Ryan Sterling: “Financial independence is not optional.”
- Ryan on planning: “The financial plan is the roadmap—helping you take the most efficient route.”
- Mindy (host): “Flat fee or advice-only…is the best way to align interest between a CFP and their clients” (initial position).
- Scott (host): Strong aversion to commission-selling advisors who push permanent life insurance.
Final, concise takeaway
There is no single “best” fee model for everyone. Flat fees minimize compounding advisory costs and can reduce incentives tied to portfolio growth. AUM can align long-term advisor-client relationships, improve client stickiness and behavior, and provide access to managed investment tools — benefits that matter to many clients, especially those who value ongoing coaching or lack confidence to DIY. Choose an advisor based on: (1) clarity and transparency of fees; (2) how that fee model aligns with your behavior and goals; and (3) the actual planning/investment capabilities and trustworthiness of the advisor — not only on the billing label.
Where to find the guest
- NerdWallet Wealth Partners: nerdwalletwealthpartners.com
- Ryan Sterling on LinkedIn: Ryan Sterling
(Email the hosts via their BiggerPockets Money addresses if you want to share your experience with advisors or suggest follow-up questions.)