RIA Compliance and Practice Management Blog

Best Practices for RIA Client Fee Billing Processes

Posted by RIA in a Box

Jul 19, 2021 3:23:39 PM

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When establishing a new registered investment adviser ("RIA") firm, you have a substantial list of duties to perform. Starting from registration, compliance duties, employee supervision and client acquisition – and the list goes on. But what about securing payment for your advisory services? Or reminding clients of outstanding bills? Or even managing incoming payments? All of this does not sound too complicated in theory, but these processes can take up a significant amount of time if not executed efficiently. This blog post will cover some of the most common billing-related issues RIA firms face, how to avoid them, and how your firm can benefit in the long-term by streamlining this process.

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Most common RIA fee billing bottlenecks

The process of billing takes time, resources, and close attention to detail – especially if completed manually by pen and paper. If RIA firms manage to improve certain client billing-related tasks, they might be able to save a lot of time and concentrate on what is important: investment management, client relationship building, and new client acquisition. Client fee billing inaccuracies caused by manual errors can have severe impacts on your entire business and compliance. Some examples might be payment delays or errors, wrong calculations resulting in over or undercharges, mismatched data entry, or simply overall confusion within the firm.

Mistakes can range from an improper formula being utilized to basic human input error to not using the proper account balances, as stated in the client contract of Form ADV. Another fact to remember is that many states require RIA firms to send separate billing invoices to clients when a fee is charged. This might be an operational challenge many advisors underestimate at first. Unfortunately, even if unintentional, over billing advisory clients can lead to serious regulatory compliance issues.

Our top three RIA time-saving client billing tips

As RIA compliance consultants, we continue to see an increasing number of investment adviser regulatory compliance issues related to fee billing. Some of our key recommendations to save time and to ensure accuracy on billing procedures are:

  1. Invest in the proper automated client fee billing technology to help simplify and automate the client fee billing and invoicing process to improve operational efficiency and reduce errors. 
  2. Review all client investment advisory contracts and the firm's Form ADV to ensure that the actual fees charged to clients match exactly what is stated and agreed upon as far as calculation method, frequency, time period, date of ending balance, etc.
  3. Seek to simplify the client fee billing process by moving to a standard client fee schedule. Every time a new client fee schedule is introduced to the firm's operations, there is additional risk for error or oversight.

Automated RIA Client Billing Systems

By upgrading technology to an automated client fee billing solution, RIAs can save significant time and resources. Automated billing systems are technology solutions that focus on managing the entire billing routine including invoicing, sending payment reminders or late notices, payment collection, provisioning, creation of financial reports, and many more helpful tasks.

Financial services business such as RIA firms are prime targets of cybercrime, especially recently with businesses transitioning to remote work and remote access of sensitive data. An automated billing platform allows you to store, collect, and analyze your client fee billing payments in a secure and reliable environment. By automating your billing procedure, you can ensure the process is done properly, correctly, and most important in a timely manner.

Effective RIA Client Fee Billing Outcomes

Implementing a robust system can have the following beneficial outcomes on your RIA firm:

  • Compliance with accounting and fee billing standards
  • More time for customer relationship building and acquisition
  • Accurate and timely invoicing
  • Significant reduction of hourly wages of your employees, if the billing process is done in-house
  • Minimization of paper use
  • Improved timing of cash flow
  • Secured payment contributing to improvement of client trust and satisfaction
  • Reduction of revenue leakage

Keep in mind: an easier payment option also means faster payment. However, don't forget the need to ensure any client fee billing option also meets all relevant regulatory compliance requirements.

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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.

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