Executive Summary

Wealth advisors are facing mounting pressure to control costs—both for clients and their own practices. Traditional models of outsourced portfolio management, hiring expensive specialists like CFAs or portfolio managers, and relying on legacy systems often result in significant portfolio management costs that erode client returns and advisor margins.

According to industry research, 59% of a typical client’s assets-under-management (AUM) fee is allocated to investment management costs, with the rest spent on planning and other advisory work. This allocation underscores how much of what clients pay often goes toward asset management costs rather than value-added planning services.

ALTITUDE AI empowers advisors to bring portfolio management in-house, using modern portfolio construction software for advisors to reduce fees, scale personalization, and improve profitability.

The Hidden Costs of Traditional Portfolio Management

1. High Asset Management Fees for Clients

Wealth managers typically charge an AUM fee based on a percentage of the client’s assets, often around 1% or higher annually. While that fee may seem reasonable at first glance, that percentage covers both advisory work and investment management services—and in many cases, investment management alone accounts for the majority of the cost.

Whether delivered through brokerages, external OCIO platforms, or expensive outsourced portfolio management providers, these fees can significantly reduce clients’ net returns over time.

2. Expense Layers Compound the Problem

Clients often face not just the advisor’s fee but additional underlying costs associated with trading, fund expense ratios, and third-party managers—making the cost of asset management even harder to justify.

For example, a $1 million portfolio paying a 1% AUM fee typically costs $10,000 per year. If 59% of that fee is allocated to pure investment management, that’s $5,900 going directly toward management costs before any planning, execution, or advisory insight is provided.

3. Cost of Hiring Traditional Portfolio Talent

Hiring a full-time CFA or experienced portfolio manager exacerbates portfolio management costs for RIAs:

• Cost of hiring a CFA: Salaries plus benefits often exceed six figures annually, and those costs must be recovered through client fees.

• Cost of hiring a portfolio manager: Beyond salary, firms incur recruitment, infrastructure, risk oversight, and technology costs.

These overheads make it difficult for smaller or mid-sized practices to compete on price without sacrificing personalized service or margins.

ALTITUDE AI: A Better Way to Manage Client Portfolios

ALTITUDE AI is designed to be the portfolio management platform for advisors—a modern alternative to traditional, expensive solutions. By leveraging intelligent automation and data-driven portfolio construction, advisors can:

1. Reduce Reliance on Expensive Outsourced Solutions

Instead of outsourcing portfolio construction to third parties or hiring full-time specialists, ALTITUDE AI provides automated support that delivers advisor-quality portfolios directly within the RIA’s workflow.

This directly targets the cost of asset management without reducing service quality.

2. Lower Portfolio Management Costs for Clients

By using ALTITUDE AI, advisors can significantly reduce the portion of fees that go toward investment management:

• More efficient portfolio construction

• Automation of rebalancing and compliance

• Integrated risk and tax considerations

This translates into greater value retained for clients and lower drag on long-term performance.

3. Empower In-House Portfolio Management

Firms that adopt an in-house portfolio management RIA strategy using software like ALTITUDE AI no longer need to depend on expensive external providers or scale headcount to grow.

Instead of absorbing rising salaries for CFAs or portfolio managers, advisors can rely on intelligent software to deliver consistent results.

Quantifying the Impact

Below is a hypothetical comparison between traditional and ALTITUDE AI-powered operations for a firm managing $500M in AUM:

By reducing dependency on expensive human portfolio managers and third-party platforms, advisors can dramatically reduce total portfolio management costs while maintaining, or even improving, quality of service—especially as AI automation scales tasks once done manually.

Client Experience and Fiduciary Value

Clients are increasingly fee-aware and want transparency. Given that a majority of what they pay traditionally goes to investment management costs, successful advisors are shifting to models that reflect:

• Transparent pricing

• Clear separation of service value vs. cost

• Lower drag on returns

With ALTITUDE AI, advisors can illustrate how lowering portfolio management costs directly benefits clients’ net returns—strengthening trust and differentiation in competitive markets.

Conclusion

For wealth advisors focused on growth, differentiation, and client value, ALTITUDE AI offers a compelling path to:

• Reduce reliance on expensive outsourced portfolio management

• Lower the cost of asset management to clients

• Avoid steep costs associated with hiring CFAs and portfolio managers

• Deliver high-quality model portfolio management software within the RIA

• Transform portfolio construction into an efficient, scalable in-house capability

In an era where 59% of client fees often go to investment management, ALTITUDE AI lets firms reclaim that spend and deliver greater value to clients and advisors alike.