Pete. There's no really good definitive response to your question but maybe I can shed some light on it for you.
The first point is one of sheer numbers. A $500K account that earned 10% (pretty good) and paying 1.5% would earn the adviser $750 (gross). That's annually. When you figure in overhead for a financial services office you're lucky to net half. So to net minimum wage, the adviser would have to experience $1.4M growth in his AUM every year. At a realistic 8% growth, he would need nearly $18M in AUM to achieve this. And let me tell you, people don't get into the business to struggle, prospect, work long hours and meet compliance, education and testing requirements to make minimum wage. And $18M in AUM is a pretty good number for one adviser and one that generally takes years to amass.
As far as not paying for failure, I agree that better advisers will manage your money better and make more profitable decisions than poorer ones. Their compensation is higher as a result of two things: Higher AUM due to more growth and glowing recommendations from satisfied clients which leads to more clients and higher AUM. However, nobody can control or predict the wonderful world of finance with accuracy and the markets are going to do what they dang well please. To consider a market fluctuation
"failure" on the part of the adviser isn't proper. (That's like getting a haircut and walking outside in a windstorm, then coming back an hour later and demanding the barber fix it for free or give your money back.) And, as mentioned in an earlier post, I am dead-set against an adviser who bases his practice on promises of returns. One thing that hasn't been mentioned is the fact that you are free to negotiate the fees with the adviser and do some comparison shopping in that regard. And, I don't think you'll get a single taker, but there's nothing preventing you from an agreement based on performance of the portfolio. You are always free to cut your own hair, too.
Chuck.