Question: What is an appropriate wealth management rate? I’d have assets under management of $10 million, and I’m assuming there will be a sliding fee scale. Is that right? And how much would I end up spending?  (Looking for a financial adviser? You can use this tool to get matched with a planner who meets your needs.)

Answer: In the financial industry, there are many different types of fee structures, which means fees are not standard across all financial advisers. But you are correct in assuming that with $10 million in assets to invest, you’d get a sliding scale. “A financial adviser who charges based on assets under management usually charges around a 1% fee yearly, however, the 1% management fee may fluctuate based on a person’s total amount of assets,” says certified financial planner Danielle Miura of Founder-Spark Financials. Certified financial planner Kaleb Paddock of Ten Talents Financial Planning says that roughly 1% fee typically applies to the first couple million, and then a so-called waterfall schedule follows this structure where a client ends up paying a lower percentage for each incremental million being managed.

Looking for a new adviser or have an issue with a current one? Email picks@marketwatch.com.

As for the kind of waterfall schedule that would apply at various AUM breakpoints for typical RIA wealth management firms, Paddock says the following is a very common fee schedule: First $2 million = 1.00%; next $1 million = 0.90%; next $1 million = 0.80%; next $1 million = 0.70% and over $5 million is 0.50%.

But just because you can get a sliding scale, doesn’t mean you should. Indeed, it could cost you $29,000 per year if $3 million was managed, $44,000 per year if $5 million was managed and $69,000 per year if $10 million was managed. “As you can see the fees get out of control very quickly for no other inherent reason than the amount managed happened to increase, not necessarily that more time, expertise or value was added for the client,” says Paddock.

Some advisers simply charge a flat fee, which Paddock says is often a more beneficial route for clients with over $1 million dollars under management. “Under $1 million the 1% AUM fee structure can make sense if there is comprehensive tax planning, estate planning, cash flow planning and more in addition to investment management,” says Paddock. But over the million dollar mark, he says a flat price structure may work best once they understand the incentives at play and that, in general, capital markets rise over time, regardless of who manages their money. (Looking for a financial adviser? You can use this tool to get matched with a planner who meets your needs.)

A financial adviser who charges based on a flat fee can charge anywhere between $2,000 and $10,000 per year, and fees are often determined by the financial adviser’s skills and experience as well as the client’s needs. “If a client is looking for complex business tax advice, they will likely be charged more than someone who only needs investment advice. Usually, flat fee advisers will have a sliding scale that they use to determine their fees,” says certified financial planner Danielle Mirua of Founder-Spark Financials. 

But before deciding to go with a flat fee adviser, it’s important to have a clear understanding of what services they provide. “Similar to a lawyer, some advisers charge based on an hourly fee, but since hourly fees range from $200 to $400 an hour, this structure is usually not beneficial to those who have complex financial cases,” says Miura.

If it’s estimated that 40 hours are worked per year at $500 per hour then a client would pay $20,000 annually whether they had $5 million managed or $15 million managed. “The work and expertise performed have no connection to the size of the portfolio in the vast majority of cases and in cases where there is additional complexity, an adviser could simply adjust the hours worked estimate and adjust the flat price accordingly,” says Paddock. However, according to Paddock, it’s very doubtful that any single client takes more than 20 hours of actual work per year, especially after the first one to two years of the relationship. 

That said, if you tend to get caught up in the excitement of the market, certified financial planner Paul Henderson of Heritage Road Advisors says, a 1% management fee might end up saving you money compared to making emotional investing decisions. “Of course, if you’re only receiving investment recommendations for a 1% fee, it’s time to shop for a new adviser,” says Henderson.  

Looking for a new adviser or have an issue with a current one? Email picks@marketwatch.com.