RIA Compliance and Practice Management Blog

A Look at Client Fees when RIA Firms Offer Financial Planning Services

Posted by RIA in a Box

Aug 27, 2019 1:28:37 PM

Outsourced portfolio management fees for RIA firmsThe findings in this blog post come from our annual survey of over 1,350 registered investment adviser ("RIA") firms that was conducted in the first quarter of 2019. This proprietary RIA in a Box study is paired with publicly accessible data provided by the Securities and Exchange Commission ("SEC"). The goal of our annual study is to understand different options that comprise each firm characteristic, and to determine whether specific characteristics affect the growth, size, or operational efficiency of an RIA firm. The focus of this blog post is to explore the impact on advisory and total fees for advisory firms that provide financial planning services.

Percentage of RIA Firms that Offer Financial Planning Services

While the majority of RIA firms offer traditional portfolio management services, many investment advisory firms hope to establish deeper client relationships by also providing additional services such as financial planning. By offering financial planning services, RIA firms often look to offer more holistic wealth planning services to help clients meet their financial goals. Some advisory firms choose to include financial planning services as part of the standard investment advisory fee while others may charge separate financial planning fees.

Of over 1,350 firms surveyed this year, 65% of respondents indicated that their firm does offer financial planning services. This number has stayed relatively stagnant over the past few years with 66% of firms in 2017 and 67% of firms in 2016 offering financial planning. We further analyzed firms that offer financial planning services and those who do not, and the advisory and total fees charged by each.

Tips on Starting an RIA Firm

Advisory Fees Charged by RIA Firms that Offer Financial Planning Services

Looking at the average advisory fee charged by firms who offer financial planning services compared to firms that do not, the survey revealed that the average advisory fee charged is the same for both groups at 0.96%. The chart below shows the distribution of advisory fees charged by RIA firms that offer financial planning services:

Average advisory fee charged by RIA firms that offer financial planning services is 0.96%

Compared to the average advisory fees charged by all RIA firms, regardless of whether firm offers financial planning services or not, the distribution of average advisory fees is quite similar with the largest concentration of firms charging between 0.96% and 1.00%. Given that the advisory fees charged by RIA firms offering financial planning services do not appear to diverge from the advisory fees charged by advisory firms that do not offer financial planning services, it's also likely that a good portion of the firms that provide financial planning services are charging additional separate fees to provide the financial planning services.

Total All-In Fees for RIA Firms that Offer Financial Planning Services

While the offering of financial planning services had no material impact on the average advisory fee charged by an RIA firm, the total all-in fee for clients of RIA firms that offer financial planning services is 800 basis points (0.08%) higher. The average all-in fee for firms that offer financial planning services is 1.19% compared to 1.11% charged by advisory firms that do not offer financial planning services. The chart below shows the distribution of total all-in fees for firms that offer financial planning services compared to firms that do not offer financial planning services:

totalfeesfinancialplanning

Compared to the total-all in fees paid by clients of RIA firms, regardless of whether firm offers financial planning services or not, the distribution of total all-in fees is quite similar with the largest concentration of firms charging between 0.96% and 1.00%. However, when looking at RIA firms, the average total all-in fee paid by clients is 1.17%. The total all-in fee paid by clients of firms that do not offer financial planning services is 600 basis points (0.06%) less than the average for all RIA firms. On the other hand, the total all-in fee paid by clients of firms that do offer financial planning services is 200 basis points (0.02%) more than the average for all RIA firms. Thus, while clients receiving financial planning services from an RIA firm are unlikely to pay higher average advisory fees directly to the RIA firm, but are likely to experience increased total all-in costs. 

To read more about the results of this year's industry study related to fees, check out our previous blog posts highlighting outsourcing fees, advisory fees, and total-all encompassing fees. Download our Form CRS Requirements Infographic

Topics: RIA Operations, RIA Compliance, RIA Technology

RIA in a Box LLC is not a law firm, investment advisory firm, or CPA firm. RIA in a Box LLC does not provide legal advice or opinions to any party or client. You should always consult your relevant regulatory authorities or legal counsel if applicable.

RIA Compliance & Practice Management

Stay up to date on the latest RIA compliance, operations, and technology topics.

Hear from industry experts as they keep you up to date on the latest regulatory developments and practice management topics.

Subscribe to Email Updates

Recent Posts

POSTS BY TOPIC

cta-ria-compliance

cta-ria-operations

cta-ria-technology