[In-Depth] A controversy sparked by a "misredemption": What is the future of fund advisory fee models?

Jiemian News reporter | Han Li

Jiemian News editor | Song Yejun

The fund investment advisory business is undergoing a profound transformation in its fee structure.

Previously, a “mistaken redemption” controversy triggered by system upgrades at Yimu Fund pushed the fine details of the fund investment advisory fee mechanism into the spotlight. In early 2026, the “Regulations on the Administration of Sales Expenses for Open-Ended Securities Investment Funds” were officially issued (hereinafter, the “New Rules”), and the requirement that “investment advisory businesses may not charge double” became a rigid constraint. However, during implementation of the policy, the industry has exposed a series of detailed issues.

How exactly should fund investment advisory fees be charged? And how can investors clearly recognize every fee they pay? Through research with multiple public mutual fund companies, third-party investment advisory institutions, and industry research professionals, Jiemian News seeks to sort out the current state of the industry amid this transformation, the explorations by various parties, and the unresolved problems.

How are investment advisory service fees collected?

Previously, on the Yimu Fund subsidiary platform Yetang (Yetang)—due to a system upgrade mistake—wrongly redeemed some “Changying Plan” investors’ fund shares in order to deduct investment advisory service fees. Although this incident has already been resolved, it brought the detailed issues of the fund investment advisory fee mechanism back to the forefront.

When you review the incident, it is not complicated. Yimu Fund explained that it actually came down to different methods of deducting investment advisory fees. When Yetang deducts investment advisory service fees, it generally uses three methods: first, transferring from a money-fund account (such as Yimu Bao) agreed upon with the customer; second, directly deducting from the customer’s investment portfolio; and third, if the above two methods cannot be completed, then deducting again when the customer redeems the fund.

Originally for the “Changying Plan,” the second method had already been canceled. But in March, when Yetang upgraded and rebuilt its system, it mistakenly added back the originally canceled charging method. As a result, the system charged customers who had no balance in their money-fund accounts using the second method, leading to this incident.

So what are the typical practices in the industry?

In interviews, Jiemian News learned that investment advisory service fees in the industry are generally accrued based on money funds configured in a portfolio. Jiemian News reporters reviewed multiple investment advisory strategy agreements and found that investment advisory service fees are collected by summing up a certain proportion of the investors’ net asset value in their investment advisory accounts, accrued daily, and settled on a monthly basis.

“If an investor exits in the middle of the way, the fee is charged by dividing the annualized fee by the actual number of days.” A public mutual fund investment advisory manager in East China said.

A public mutual fund professional in South China also said that in the company’s investment advisory strategies, all cash-like assets are allocated, and related fees are primarily deducted from money funds.

There is also another scenario: when investors purchase an investment advisory strategy, the funds first go into an APP wallet (such as Yimu Bao mentioned above), and then they purchase the fund investment advisory strategy. Investment advisory service fees can also be directly deducted from the cash wallet.

What if there are no cash-like assets in the portfolio? “Then the fund shares in the portfolio will be redeemed proportionally to use for deducting the investment advisory fees.” An investment advisory manager said.

It is important to note that the above deduction methods mainly apply to discretionary investment advisory.

In non-discretionary investment advisory, however, the situation is different. Jiemian News learned that there are two main types of investment advisory strategies in the industry. One is discretionary investment advisory: investors fully delegate to the investment advisory institution, and the institution can directly operate the investors’ accounts, including subscription/redemption of, and rebalancing within, the investment advisory portfolio, without requiring investors to manually confirm. The other is non-discretionary investment advisory, i.e., advisory-type investment advisory, which means the investment advisory institution provides recommendations for how investors should allocate assets; investors need to manually confirm whether to follow the adjustment, and only after confirmation will the institution execute the trading instructions.

The number of advisory-type investment advisory strategies is far fewer than that of discretionary strategies. A professional at a third-party investment advisory institution told Jiemian News that advisory-type investment advisory’s customer base is mainly made up of institutions, because on the individual side it is harder to manage and impossible to grasp customers’ progress in a timely manner, which may lead to increasing tracking deviation. “If a client’s returns and the portfolio’s returns diverge significantly, it may trigger complaints.”

In terms of fees, advisory-type investment advisory also differs between institutional clients and individual investors. Jiemian News reporters, from an advisory-type investment advisory agreement they obtained, found that the agreement requires investors to allocate baseline money-fund holdings for collecting fund investment advisory service fees. Institutional investors, meanwhile, can use the scale of public mutual fund investment in the product as the fee calculation standard.

No matter which model is used, one core question always exists: can investors clearly understand the fee deduction method before purchasing?

In fact, there is currently no unified disclosure standard for this. After experiencing multiple online investment advisory businesses, Jiemian News reporters found that if investors purchase only through online channels and do not do any consulting, then before buying an investment advisory fund strategy there is usually an investment advisory service agreement. Most institutions display the fee deduction method in the investment advisory agreement, but it is not mandatory to read it. For example, in an investment advisory agreement from an institution in North China, it states that investment advisory fees will be deducted on behalf of the client from the client’s account in the form of money-fund share holdings.

In addition, some institutions stop displaying the agreement after the investor reads it for the first time, and it is not easy to find a path to read the agreement again. Even if they apply for a one-on-one investment advisory service, the investment advisory manager will only tell clients about the investment advisory fees during the conversation, but will not proactively tell them how the fees will be deducted.

Industry transformation behind the incident

This mistaken-deduction incident is closely linked to the advancement of the reform of public fund fee rates.

In interviews about the incident, Jiemian News learned that several products under Yetang originally were not charged. But in November 2025, after Yetang officially launched its first batch of investment advisory fund portfolios, the unified method changed from deducting investment advisory fees from transaction fees to collecting investment advisory fees on a monthly scheduled basis.

This is due to the official implementation of the “New Rules” on January 1, 2026. Regulators imposed a rigid constraint on “investment advisory businesses may not charge double.” So-called “double charging” refers to a situation where investors pay an investment advisory service fee, while the investment advisory institution also collects a “client maintenance fee” through the sales channel of the underlying funds.

Jiemian News learned that before this requirement was issued, when investors purchased fund investment advisory strategies, they needed to pay the investment advisory service fee, the component fund subscription/redemption fee, the redemption fee, and the component fund operating fees (including management fees/custody fees/sales service fees), among others. In actual sales, there were cases where client service fees (i.e., trail commissions) were used to offset the investment advisory service fee.

“According to the requirements of the ‘New Rules,’ for sales institutions that conduct investment advisory business, for fund shares included in an investment advisory portfolio, they may not charge client maintenance fees to the fund company anymore. The investment advisory institution must re-sign the sales agreement with the fund company, adjusting the trail commission fee rate for these specific shares to 0.” A public mutual fund professional in North China revealed.

This person also said that the above requirements can be handled through automatic system identification and exclusion. “The fund company’s valuation system and sales system will label ‘investment advisory portfolio.’ When calculating and allocating trail commissions, the system will automatically exclude these assets to ensure that the flow of funds no longer goes from the fund company to the investment advisory institution.”

However, the rollout of the “New Rules” has not been smooth either. The recent “Yetang” platform incident reflects the hesitancy and friction within the industry during its transition.

No transparent, unified standards yet

Jiemian News learned that although the “New Rules” have already proposed a ban on “double charging,” the industry is still in a transition period. On one hand, implementing the requirement needs technical support and requires改造 of the current system. On the other hand, the industry has not yet discussed a plan that can be directly implemented.

“The industry has discussed a solution: previously, the client maintenance fee would be paid to the sales agents. But under the premise of not allowing double charging, this portion of the fee could be returned to the client. However, there are still disputes regarding compliance for this plan; in short, it is still at an early stage of discussion.” A public mutual fund investment advisory professional who did not wish to be named said.

In Jiemian News’s research, some investment advisory institutions have already been trialing this approach. Under the approach, the institution returns all after-tax sales-agent fees collected to investment advisory clients, and the investment advisory clients can receive up to 50% of the underlying fund management fee of the investment advisory portfolio.

In addition, fees are not uniform in practice, and some platforms offer discounts.

For instance, CMB Wealth offers reductions in subscription fees, and some strategies discount the investment advisory service fee after investors hold the strategy for more than a certain number of days. Taking the Happiness All-Weather strategy as an example: if investors hold the strategy for more than 548 days, the investment advisory service fee will drop from 0.6% per year to 0.3%; if after holding for more than 548 days the cumulative return of the strategy is less than or equal to 0, then the investment advisory service fee will further drop to 0.03% per year.

Similar fee structures are being referenced by other institutions as well. A public mutual fund professional in East China said: “We’re also exploring innovations in fee models. For example, charge a certain fee when investment advisory performance, drawdown, and volatility metrics all meet the established targets; if performance or drawdown does not meet the targets, charge less or even charge nothing, to ensure alignment with investors’ investment interests.”

But the above situation also reveals the problem that current fund investment advisory fee standards are not unified. In Jiemian News’s investigation, reporters learned that the investment advisory service fee charged by each institution ranges from as high as 1.2% to as low as 0.1%, with the level determined by the assets allocated in the portfolio. If the strategy mainly allocates fixed-income funds, the investment advisory service fee is relatively low; conversely, if the strategy mainly allocates equity-like assets, the fee is relatively high.

“This is also why fees are difficult to unify: the diversity of strategies, the content of services, and each platform’s cost structure all lead to fee rate differentiation, and currently there is no refined standard for fee rates.” A public mutual fund investment advisory professional said.

A Tianxiang investment advisory research professional, in an interview with Jiemian News, said that fee opacity will have an adverse impact on the industry’s development. The industry can allow differentiated fee-rate plans, but regardless of what plan is used, transparency is the primary requirement. Opaque fee rates seriously damage investors’ trust. This opacity is sometimes not an intentional concealment, but rather the fee design is too complex for investors to understand. Therefore, a more standardized, transparent, and simple fee structure—or a key prerequisite for future development of fund investment advisory business—matters greatly.

So, when facing a complex fee mechanism, how can investors protect their right to know?

The aforementioned public mutual fund professional in North China told Jiemian News that investors can generally check their investment advisory strategy fee situation in two ways. First, check the agreement: by reviewing the “Fund Investment Advisory Service Agreement,” which should clearly state that “this institution will no longer charge client maintenance fees paid by the fund manager for fund holdings within the investment advisory portfolio.” Second, check the statements: review the related fee deduction records. If you paid an annualized investment advisory fee, then the underlying fund holdings should not include “implicit costs” used to pay the sales channel.

The original purpose of the fund investment advisory business is to help investors address the pain points of “difficulty choosing funds” and “difficulty timing.” It exchanges professional service for trust. However, when the fee mechanism becomes complicated, the fee deduction method is not transparent enough, and information disclosure is inconsistent, investors’ trust is easily eroded. While the Yetang incident is only a single case, it sounds an alarm: against the backdrop of fee-rate reform, what the industry needs is not only a compliant “bottom line,” but also genuine respect for investors’ right to know and right to choose. Only by making fees clearer and services more transparent can fund investment advisory truly earn investors’ long-term trust.