RIA Fees for Managed Accounts

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May 23, 2006 11:36 pm

Hi


I was curious if anyone could provide feedback regarding average RIA fees being charged for AUM . . . .  tiered or otherwise . . .  or a link to any recent articles or surveys


Thanks


Kive

May 24, 2006 10:44 pm

Kive -



RIA's are structured no differently than the managed accounts through a

wirehouse.



The primary difference is in HOW they are billed, not necessarily WHAT

they are billed.



Fees are generally .6% for an equity manager (inclusive of manager fees

and trading costs), and then the advisor usually tacks on 1.25% for their

fee. Generally an 'all in' fee of 1.8% for an equity manager is rather

common. This fee generally survives at most levels of assets under

management, until you get to $2 million - at that point you are

somewhere around 1.5% total expense.



Fees for a bond manager are generally .30% for the manager EXCLUSIVE

of trading costs. I've seen most RIA's use municipal bond managers who

have low turnover, so there is no need to 'wrap' the trading costs within

the management fee. The advisor usually charges another .60 to .70%,

with a total expense of 1.0% to the client. Again this is usually the case

up to $2 million without much problem.



The good part is that when you charge the client 1.25% (advisor fee) for

an equity managed account, you keep 100% of the fee. NO sharing with

your firm, etc. It's best to start chipping away at gross fees when you

start at 100% vs. 80 to 85% at an independent B/D, in my opinion.



Most RIA's don't tier their rate structure. It's best to have a structure that

is flat rate, and easy to understand, explain and compute.



For fund programs, RIA's generally charge 1 to 1.25% of AUM. This fee

varies depending on whether or not the client would like discretionary

management, performance reporting, or non-discretionary (client input)

money management.



Enjoy and good luck.



Captain.

Sep 17, 2006 11:28 am

Dear Captain,


Sorry for my delayed response.


Thank you for the excellent feedback.


Kive


Sep 17, 2006 11:55 am
Captain:

Kive - 


The good part is that when you charge the client 1.25% (advisor fee) for an equity managed account, you keep 100% of the fee. NO sharing with your firm, etc. It's best to start chipping away at gross fees when you start at 100% vs. 80 to 85% at an independent B/D, in my opinion.



In the mid 1980s there was a cover on Forbes magazine entitled, "The Incredible Multiplicity of Funds."  It dealt with the rather remarkable growth in mutual funds that accompanied the roaring bull market.


Anybody who picked three winners in a row felt qualified to start a mutual fund and many of them did--of course a monkey with a pencil could pick winners in the 1980s and even the 1990s.


Similarly there are lots of Registered Investment Advisors these days, some good, most nothing more than lucky in a bull market, and some that are downright scary.


They have ridden the bull market wave, whcih has been going on now for close to twenty-five years--the market started up in late August, 1982.


Investors get complacent in a twenty-five year rally and giving up 125 basis points for no apparent reason was not that big a deal.


There are those who believe that the investors will not remain complacent as their retirements get closer and they get statements showing that some man or woman they barely know reaches into their account and takes money out of it every so often.


Today's advisors would do well to assume that all of their clients will wake up one day and ask themselves what in the world is happening, and stop giving away their money. 

Sep 17, 2006 4:13 pm

Welcome back NASD