Starting June 29, 2026, the SEC significantly raised the minimum wealth thresholds that allow registered investment advisers to charge performance-based fees — a change that directly affects what many clients pay. If you’ve been researching financial advisor fees and wondering whether your portfolio qualifies you for performance-based pricing, these new numbers are now the benchmark.
What Changed
The SEC issued a final order (Release No. IA-6961) adjusting the “qualified client” thresholds under Rule 205-3 of the Investment Advisers Act. There are two tests to qualify — and both got materially higher:
- Assets-under-management test: raised from $1.1 million to $1.4 million in assets managed by the adviser.
- Net worth test: raised from $2.2 million to $2.7 million (excluding primary residence for individuals).
These thresholds are adjusted every five years for inflation using the Personal Consumption Expenditures index — this is the first update since 2021. As Goodwin Law noted in its analysis, existing advisory contracts signed before June 29, 2026 remain valid under the old rules; only new clients or new agreements signed on or after that date must meet the higher bar.
What This Means for Investors
Performance-based fees — where an adviser takes a percentage cut of investment gains — are only legal when charged to “qualified clients.” The higher thresholds mean fewer people automatically qualify for this pricing model, which can be both a protection and a limitation depending on your situation.
For the vast majority of retail investors, this change has no direct impact: they were never eligible for performance-based fee structures in the first place. For those approaching the threshold, it’s a signal to ask any prospective adviser exactly which fee model applies and whether you meet the current legal definition. The rule exists precisely to ensure that complex, incentive-based compensation structures are used only with clients sophisticated and wealthy enough to understand the risks.
Who Is Exempt from the New Numbers
Notably, “qualified purchasers” (generally investors with $5M+ in investments) and “knowledgeable employees” of certain funds are automatically deemed qualified clients regardless of the new dollar amounts. Advisers managing Section 3(c)(7) funds — whose investors must already be qualified purchasers — face minimal practical impact from this update. The bigger compliance burden falls on advisers running smaller Section 3(c)(1) funds or managing separately managed accounts for non-institutional clients.