Blog
In short
In Canada, the dominant way financial advice is priced is by charging a percentage of assets under management (later referenced in this article as "AUM"). This model is not inherently wrong, but it ties the cost of advice to portfolio size rather than to the complexity or scope of the advice itself, as advice-only financial planning does. Over time, it's bound to result in a pricing structure that is weakly connected to how financial advice is actually delivered.
After 15 years in advisory roles across the financial industry, I’ve seen how effective financial advice can materially improve outcomes for individuals and families. The value of advice in general is certainly not in question. The question is: do the fees paid for that advice reliably reflect the work being done by the advisor and the value brought forth to the client?
That question is precisely what led me to launch fPlan.
Under the AUM model, an advisor’s compensation increases automatically as a client’s portfolio grows. If equity markets rise and a portfolio increases by 20% in a good year, the fee paid for advice rises by the same amount, even if the client’s financial situation is unchanged.
The issue is that portfolio size and financial complexity are not the same thing. A portfolio commonly grows due to market performance alone, without any increase in planning complexity. Yet the advice fees charged scale regardless. From a pricing standpoint, this creates a direct mismatch between fees and the value of the advice.
I've heard investment performance being cited too often as justification for higher fees. This rests on a fundamental misunderstanding of how advice is priced. In many retail investment products, particularly mutual funds, the reported fee (known as the Management Expense Ratio or "MER") combines two separate components:
In other words, the advice fee is completely unrelated to the performance of the portfolio. Investment returns and advisory work are economically distinct services. In fact, many fund providers offer versions of their funds that exclude the ~1% advisor fee, but they're not made available on all platforms.
If a home sells for $1,000,000 one year and $1,200,000 the next, a percentage-based commission paid to a real estate agent increases by 20%, even if the transaction itself is materially the same. Were services underpriced in the first year, or overpriced in the second? It is difficult to argue that the value of the service scaled precisely with the sale price. The same logic applies to advice fees in the financial industry that rise solely due to market appreciation.
Canada’s Client Relationship Model (CRM) reforms, which mandate greater disclosure requirements from financial services providers, have made great strides over the years. The next phase, expected in 2026–2027, will further expand reporting on total costs which will be visible on client statements. As investors see the total fees paid, expressed in absolute dollar terms as opposed to ambiguous percentages, it becomes easier to evaluate whether those costs are proportionate to the advice received.
To illustrate the long-term impact of advice fees, consider a $400,000 portfolio earning a 6% average annual return over a 20-year horizon.
When using a traditional 1% AUM model, the total fees paid over two decades amount to $139,314, resulting in a final portfolio value of $1,049,255. In contrast, an advice-only structure (which includes a $250 annual review fee + a $1,400 triennial financial plan update) costs just $18,702 over the same period, allowing the final portfolio to grow to $1,249,434.
The resulting difference is staggering: by choosing an advice-only model under these assumptions, you would save $120,612 in fees for the same level of advice, and generate an additional $200,179 in total wealth. This wealth gap of over $200,000 occurs because of the "opportunity cost" — every dollar not spent on a commission remains in your account to compound over time.
And this example does not even consider recurring investment contributions which would further increase the savings from a fee-only / advice-only model.
The Long-term Impact of Advice Fees on Portfolio Growth
Comparison of a $400,000 portfolio over 20 years at 6% annual growth
Flat-fee financial planning is about aligning price with work. Fees are linked to complexity rather than market performance, similar to how accountants or real estate lawyers charge for their expertise. A larger portfolio does not necessarily imply a more complex financial situation, just as a smaller portfolio does not imply simple planning needs.
The purpose of fPlan is not to criticize traditional models, but to give Canadians a clearer way to evaluate whether the fees they pay are commensurate with the advice they receive.
As investors become more aware of the true dollar cost of advice, I believe demand will grow for pricing models that are easier to understand and more directly linked to the service provided.
That belief is the reason fPlan exists.