Fiduciary fees are what you pay someone who is legally required to put your interests ahead of their own, and they follow a small number of predictable structures: a percentage of assets under management (commonly around 1% a year for a human investment adviser), an hourly rate, a flat or retainer fee, or, for trustees and executors, a percentage of the trust or estate or “reasonable compensation” set by state law. Whatever the structure, it has to be disclosed in writing before you sign, and if the charges don’t match the disclosure or the work, there are specific places to complain.
What Counts as a Fiduciary Fee
A fiduciary is legally obligated to put your interests ahead of their own. For Registered Investment Advisers and their representatives, that obligation comes from the Investment Advisers Act of 1940, which courts read as imposing a federal fiduciary duty made up of a duty of care and a duty of loyalty.1Securities and Exchange Commission. Commission Interpretation Regarding Standard of Conduct for Investment Advisers Trustees and estate executors are also fiduciaries, but their compensation runs on a different track — trust documents, state statutes, and probate courts rather than SEC filings.
The practical point for a client is the compensation model. A “fee-only” fiduciary earns money solely from what you pay directly. They don’t collect commissions from mutual fund companies or insurance carriers for steering you toward particular products. The Investment Advisers Act makes it unlawful for an adviser to engage in any practice that operates as a fraud or deceit on a client, which includes hiding compensation arrangements.2Office of the Law Revision Counsel. 15 US Code 80b-6 – Prohibited Transactions by Investment Advisers Advisers who do receive third-party compensation must disclose it and explain the conflict.
One boundary worth flagging up front: broker-dealers are not held to the same ongoing fiduciary duty. Since 2020 they follow Regulation Best Interest, which requires them to act in a retail customer’s best interest when making a recommendation.3Securities and Exchange Commission. Regulation Best Interest – The Broker-Dealer Standard of Conduct If someone tells you they’re a fiduciary, ask whether they’re registered as an investment adviser or operating as a broker-dealer. The answer determines which fee rules apply.
How Investment Advisers Charge
Fiduciary investment advisers use four main compensation models, and many combine them.
A Percentage of Assets Under Management
The most common structure is a percentage of the portfolio the adviser manages, billed quarterly. The median fee among human advisers sits around 1% a year, though automated platforms run 0.25% to 0.50%. Most firms use a tiered schedule that drops as the account grows: you might pay 1% on the first $1 million and 0.75% above that, producing a blended rate that falls as your balance rises.
This model links the adviser’s income to your portfolio value and usually bundles portfolio management, trade execution, and ongoing planning into one charge. It gets expensive at high balances — 1% of $3 million is $30,000 a year — and many advisers will negotiate on larger accounts.
Hourly Rates
Hourly billing runs roughly $150 to $400 an hour, with specialists in major cities charging $500 or more. It suits a specific question rather than continuous management: whether to exercise stock options, how to handle an inheritance, how to sequence retirement withdrawals. You and the adviser agree on scope and estimated hours in advance, so the total stays predictable.
Flat Fees and Retainers
A flat fee covers a defined project for a fixed price regardless of your assets. A comprehensive financial plan typically runs $2,500 to $8,000. Retainers are the subscription version — a fixed monthly or annual charge for ongoing planning access and periodic reviews. This works for younger professionals with complex income (equity compensation, multiple retirement accounts, student loan optimization) but not yet enough investable assets to make AUM billing sensible for either side.
Blended Arrangements
Many advisers mix models: a lower AUM fee for portfolio management with a separate flat fee for the initial plan, or a planning retainer with an AUM charge that only kicks in above a set asset threshold. The point is to price each service to the work involved rather than force everything into one billing method.
How Trustees and Executors Are Paid
Compensation for trustees and estate executors looks nothing like advisory fees. It’s set by the trust document, by state law, and often directly by a court.
Trustees
Whatever the trust document says controls first. If it specifies a percentage or dollar amount, that figure generally governs. Many trust instruments simply say the trustee is entitled to “reasonable compensation,” which leaves the number to be worked out.
When the document is silent or vague, state law fills the gap. Courts assessing reasonableness weigh the size and complexity of the trust assets, time spent, level of responsibility, and results. Professional trust companies typically charge 1% to 1.5% of trust assets annually, often with a minimum. Individual trustees serving family trusts can still claim reasonable compensation, though courts may scrutinize hourly value more closely. Even where a trust document sets a specific fee, a court can adjust it if the trustee’s actual duties turned out very different from what the grantor anticipated.
Executors
Executor fees, sometimes called personal representative fees, fall into two camps by state. A minority of states set compensation by statute as a percentage of the gross estate, often on a tiered schedule, generally in the 1.5% to 5% range depending on state and size. The fee is calculated on gross value before debts because the administrative burden of inventorying and managing assets exists regardless of what the estate owes.
Most states use “reasonable compensation,” decided by the probate court on factors similar to those for trustees: asset complexity, time, skill, and administrative efficiency. Courts look more favorably on fees when the executor can show they saved the estate money or resolved disputes quickly. Detailed time records matter. Even an executor taking a percentage fee should document hours worked, because a beneficiary can challenge the amount and the court will want to see what was actually done.
Extraordinary Services
Standard fees cover routine administration: collecting assets, paying bills, filing inventories, making distributions. Work outside that scope can support additional compensation. Common examples include handling will contests, selling real property, dealing with tax audits, running the decedent’s business, or resolving environmental or zoning issues. Extra fees usually require separate court approval and detailed records showing why the work fell outside ordinary duties.
Watching for Two Layers of Fees
If a trustee or executor hires an outside investment adviser to manage the portfolio, the adviser’s AUM fee is a separate charge paid by the trust or estate. The fiduciary’s own fee covers oversight, administration, distributions, and legal compliance, not investment management. A trust with a corporate trustee and an outside adviser is paying two layers, which is worth understanding when comparing total costs.
What Must Be Disclosed Before You Pay
Fee disclosure runs on layered rules so you can evaluate costs before committing. For investment advisory clients, the two central documents are Form ADV Part 2 and Form CRS. Retirement plan fiduciaries face separate rules under ERISA.
Form ADV Part 2
Every registered investment adviser has to deliver a written brochure, Form ADV Part 2A, to prospective clients before or when the advisory agreement is signed. Item 5 requires the full fee schedule, whether fees are negotiable, whether the adviser deducts fees directly from your accounts or bills you, and how often they charge. The adviser also has to describe other costs you’ll bear, such as custodial fees or mutual fund expense ratios.4U.S. Securities and Exchange Commission. Form ADV Part 2 – General Instructions
If the adviser or any supervised person earns compensation from selling investment products (commissions, asset-based sales charges, mutual fund service fees), Item 5 requires disclosure that this creates a conflict of interest and an explanation of how it’s addressed. Advisers who earn more than half their revenue from such commissions must specifically state that commissions are their primary compensation source.4U.S. Securities and Exchange Commission. Form ADV Part 2 – General Instructions
Form CRS
Since 2020, investment advisers and broker-dealers also have to give retail investors a brief Form CRS relationship summary. This two-page document is a plain-language overview of services, fees, conflicts of interest, and disciplinary history. You should receive it at the start of the relationship, and the firm must update it whenever there’s a material change.5Securities and Exchange Commission. Form CRS Relationship Summary – Amendments to Form ADV When delivered electronically, the summary must link to fee schedules and may include tools like fee calculators.6U.S. Securities and Exchange Commission. Form CRS Relationship Summary It’s a supplement to Form ADV Part 2, not a substitute. Review the full brochure before signing.
Retirement Plans Under ERISA
Fiduciaries managing 401(k) and other employer-sponsored plan assets face separate obligations under ERISA, which requires them to act prudently and to ensure service-provider fee arrangements are reasonable.7eCFR. 29 CFR 2550.404a-5 – Fiduciary Requirements for Disclosure in Participant-Directed Individual Account Plans Under the Section 408(b)(2) regulations, any service provider expecting to receive $1,000 or more from a covered plan must give written disclosures to the plan’s responsible fiduciary describing the services, all direct and indirect compensation (including revenue sharing and payments among affiliates), and how the compensation will be paid.8eCFR. 29 CFR 2550.408b-2 – General Statutory Exemption for Services or Office If a provider fails to make those disclosures, the arrangement isn’t reasonable, which turns it into a prohibited transaction under ERISA.9U.S. Department of Labor. Fact Sheet – Service Provider Disclosure Regulation That penalty gives providers strong incentive to disclose everything upfront.
Whether You Can Deduct the Fee
Deductibility now depends heavily on whether you’re paying the fee personally or through a trust or estate.
For individuals, investment advisory fees paid from personal accounts are not deductible on a federal income tax return. They used to qualify as miscellaneous itemized deductions subject to a 2% floor under Internal Revenue Code Section 67, but the Tax Cuts and Jobs Act suspended those deductions starting in 2018, and 2025 amendments made the elimination permanent by removing the original sunset date.10Office of the Law Revision Counsel. 26 US Code 67 – 2-Percent Floor on Miscellaneous Itemized Deductions There is no current path to deducting personal investment management fees.
Trusts and estates fare better, but only for certain costs. Under Section 67(e), administration expenses that would not have been incurred if the property weren’t held in a trust or estate are treated as above-the-line deductions and aren’t hit by the permanent elimination.10Office of the Law Revision Counsel. 26 US Code 67 – 2-Percent Floor on Miscellaneous Itemized Deductions Trustee fees, executor fees, probate attorney fees, and accounting fees specific to trust or estate administration clearly qualify.
Bundled fees complicate things. A single charge that covers both trust-specific administration and services an individual would also pay for, like investment management, must be allocated between the deductible trust-specific portion and the non-deductible portion a hypothetical individual investor would also incur.11Internal Revenue Service. Notice 2018-61 – Clarification Concerning the Effect of Section 67(g) on Trusts and Estates The investment management slice remains non-deductible. If your trust pays a corporate trustee a single annual fee covering both administration and portfolio management, ask for a breakdown showing how much goes to each function.
On the reporting side, trusts and estates paying $600 or more in fiduciary fees during the year must report those payments on Form 1099-NEC or Form 1099-MISC, depending on the services. Qualified pension and profit-sharing plan trusts and tax-exempt organizations are specifically included.12Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC Personal fees you pay an adviser out of your own pocket aren’t subject to 1099 reporting.
How to Push Back on a Fee That Looks Wrong
The fiduciary standard requires more than disclosure. It requires that fees be reasonable in relation to the services provided.
For an investment adviser, start by comparing the actual charges against the Form ADV Part 2 disclosure. If they don’t match, or if the services promised aren’t being delivered, file a complaint with the SEC or your state securities regulator. The antifraud provisions of the Investment Advisers Act prohibit any practice that operates as a fraud or deceit on a client, and charging unreasonable fees while failing to deliver the promised services can fall within that prohibition.2Office of the Law Revision Counsel. 15 US Code 80b-6 – Prohibited Transactions by Investment Advisers You can also terminate the relationship. Most advisory agreements allow termination with notice, and prepaid fees have to be refunded on a prorated basis.
For a trustee or executor, beneficiaries and other interested parties can object to the fee through the supervising court. Common grounds include fees excessive for the work performed, lack of transparency in how the fee was calculated, evidence of negligence or mismanagement, and situations where the fiduciary billed the estate for work someone else actually did. The objecting party carries the burden of showing that the fees are unreasonable or that the fiduciary breached their duty.
Courts hearing fee disputes apply the same factors they use to set reasonable compensation in the first place: size and complexity of the estate or trust, time and skill involved, and whether administration was efficient and in good faith. A fiduciary with detailed time records who can show their work preserved or increased the estate’s value will have a much easier time defending a fee than one who took a percentage and can’t explain what they did. If the court finds a fee unreasonable, it can reduce the compensation.