This one comes up a lot, and honestly, it’s a great question. On the surface, it sounds logical: if an advisor earns 1% of your assets and your portfolio grows, they make more money, so they must be motivated to make you more money, right?
Well, not exactly. Let’s unpack that.
A prospect recently said to me that a 1% AUM advisor told them that flat-fee advisors don’t have skin in the game, so I wanted to take my time to write this article and explain this fallacy.
This one comes up a lot, and honestly, it’s a great question. On the surface, it sounds logical: if an advisor earns 1% of your assets and your portfolio grows, they make more money, so they must be motivated to make you more money, right?
Well, not exactly. Let’s unpack why that logic doesn’t hold up, and why flat-fee fiduciary advisors may actually have more skin in the game than the traditional model.
The “Skin in the Game” Myth
Here’s the truth: Most 1% advisors and flat-fee fiduciaries typically build portfolios using low-cost ETFs or index funds. That means your returns are mostly driven by the market itself, not your advisor’s trading decisions.
So if your portfolio goes up 10%, it’s because the S&P 500 or your asset mix performed well, not because your advisor discovered something special.
Now, let’s look at incentives.
If you have $2 million and pay a 1% advisor, that’s $20,000 per year.
If your portfolio grows 10%, your advisor now earns $22,000.
That’s a $2,000 bump. It’s not insignificant, but it’s not the kind of incentive that changes behavior either.
So the idea that “they make more only when I make more” is technically true but economically pretty weak. If you want to learn more about how fees can quietly compound over time, check out my related article: Am I Paying Too Much in Advisor and Investment Fees?
What Really Drives Behavior
Flat-fee advisors like myself don’t earn more just because markets go up. But here’s the thing. My entire livelihood depends on your satisfaction, trust, and renewal each year.
That means my “skin in the game” comes from making sure you get results that actually matter to you. That could be avoiding mistakes during a volatile market, improving your tax efficiency, or giving you clarity on your retirement income plan.
And, If I don’t deliver real value across your entire financial picture, you simply don’t renew. That’s the real alignment. It’s not about chasing returns; it’s about helping you grow and manage your wealth in a smarter, more tax-efficient way.
Fiduciary Duty Isn’t About Performance
Being a fiduciary means acting in your best interest, even when that means recommending something that could reduce my fee base. Sometimes that’s paying down a mortgage, investing in your business, or simply enjoying the money you’ve already worked hard for.
A traditional 1% advisor, however, is financially incentivized to keep as many of your assets as possible under management, even when it may not be the best move for you.
So who really has skin in the game? The advisor who earns more when you give them more, or the advisor who depends on your trust and renewal every year to stay in business?
Here Are Some Questions You Should Be Asking
Whether you’re interviewing financial advisors or already working with one, these are worth asking:
- How do you get paid and who all pays you?
- Do you earn commissions or referral fees from any products or custodians or if you refer me to another professional?
- Would your compensation change if I decided to pay down debt, invest in real estate, or hold more cash?
- How much will I actually pay you over the next 10 years if my investments grow as planned?
- Do you include tax planning, estate coordination, and retirement income planning in your fee?
A fiduciary who charges a flat, transparent fee can answer all of these questions clearly.
The Bottom Line
At the end of the day, “skin in the game” isn’t about whether your advisor’s income moves with the market. It’s about whether they’re willing to give you honest, conflict-free advice when it matters most.
That’s what I’ve built Singh PWM around: a flat fee, no commissions, no hidden incentives, just real financial planning for real people.
Raman Singh, CFP®
Your Personalized CFO
Phoenix | Scottsdale | Tucson | Virtual Nationwide
www.SinghPWM.com
Important Disclosures
The information provided herein was obtained from sources believed to be reliable and is believed to be accurate as of the time presented, but it is provided “as is” without any express or implied warranties of any kind.
This material is intended for informational and educational purposes only and should not be construed as individualized investment, tax, or legal advice. You should consult with your own qualified investment, tax, or legal advisor before making any decisions based on this material.
Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results. Withdrawal strategies and tax outcomes will vary depending on individual circumstances, account types, tax brackets, and market conditions. No strategy can guarantee success or prevent losses.
Investment advisory services are offered through Singh PWM, LLC, a registered investment adviser offering advisory services in the State of Arizona and other jurisdictions where registered or exempted.
Singh PWM, LLC is a registered investment advisor offering advisory services in the State(s) of Arizona and in other jurisdictions where exempted. Registration does not imply a certain level of skill or training. The presence of this website on the Internet shall not be directly or indirectly interpreted as a solicitation of investment advisory services to persons of another jurisdiction unless otherwise permitted by statute.
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