Comparing AUM pricing with the work a family actually needs

Built on Chapter 3 of Centimillionaire Strategies by Richard C. Wilson.

An asset-based price should come with an explanation of the service it purchases. A billionaire family may accept that basis for a particular engagement, but the office should understand why the fee changes with assets and what additional value or responsibility supports the change.

Chapter 3 asks whether asset-based pricing always reflects the complexity of serving a wealthy family. I would turn that question into a scope comparison. The objective is a clear commercial decision based on the actual work and the relevant professional obligations.

Define the service unit

Ask what the provider is delivering. The assignment may involve investment judgment, reporting, or coordination of records across entities. Those services can have different cost drivers, even when the provider presents them under one fee.

Identify what is included and what attracts an additional charge. The family needs to see the whole expected assignment before deciding whether the proposed price is acceptable. A broad service label should lead to an explanation of the actual commitments.

Ask what changes as assets rise

The provider may take on more responsibility or require additional resources as the relevant asset base grows. Ask for that explanation. Some work may remain similar while another part changes materially. The family should assess those differences instead of assuming the relationship is either perfectly proportional or unrelated.

Also ask what happens when assets decline. The pricing arrangement should be understandable under both directions of change. Confirm the calculation basis and how the office can check it from the relevant records.

Keep expertise in the assessment

In my remarks on pricing and investment terms, I emphasize paying for genuine value. I would use that principle when examining asset-based fees. The family should consider the responsibility and judgment it receives alongside the visible amount of production work.

A specialist can create value through a decision that takes little time to communicate. Ask the provider to explain the contribution and the evidence relevant to the family's mandate. The office can evaluate that claim without pretending every service should be priced by hours.

Build a meaningful alternative

If the office obtains another proposal, give the provider the same scope and relevant facts. Ask it to identify assumptions and exclusions. A comparison is useful when both firms are pricing work the family actually needs.

Consider whether a different pricing basis would change incentives or service availability. A fixed fee can require limits on scope. A project fee can leave ongoing responsibilities elsewhere. Have the relevant professionals assess the arrangement before treating a different label as an improvement.

Examine the boundaries of the asset base

Ask which assets are included in the fee calculation and why. A family may have operating companies or externally managed holdings that receive different levels of service. The office should understand how the proposal treats them.

Use the actual engagement documents to confirm the answer. A conversation can help explain the intention while leaving the written calculation unchanged. Resolve discrepancies through the authorized process before the first material payment depends on them.

Consider the costs of changing

Compare alternatives after including transition work and any new internal responsibilities. The family may need information transferred or an employee to coordinate tasks previously handled by the provider. Those costs belong in the decision even when they do not appear on the new invoice.

Assess continuity of important work. A cheaper arrangement should still have an accountable owner for each obligation the family expects to be handled. Avoid leaving a gap simply because the former fee bundled several services together.

Record the reason for the choice

The authorized decision maker should understand the proposed basis, its practical effect, and the available alternatives. Keep that explanation with the approved engagement. It gives the office a reference when the relationship or the asset base changes.

The family can then revisit the issue using the same facts. It may remain satisfied with asset-based pricing or decide another arrangement better serves the mandate. The useful result is a fee the office can explain and verify.

Questions and answers

Should the office reject asset-based pricing automatically? Assess the particular service, responsibility, and calculation. The pricing basis needs to be understood in the context of the assignment.

What should a competing proposal include? The same required scope, clear exclusions, and an explanation of the full price. Include material transition and internal work in the comparison.

This page is general information, not legal advice. Family governance documents and dispute processes should be reviewed by a qualified attorney.