What are other RIA's charging now?

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May 28, 2009 10:15 am

I'm curious what is the new "standard" for fee structures?

10 years ago when RIA's were new, I think 1% was pretty much the norm.  I get the feeling that 1.25 or 1.5 may be more normal now, with standard breakpoints obviously.

Also - I would assume your location is relevant here, so list an approximate location if you don't mind.  I'm in rural midwestern America, so I wouldn't expect to be charging the same fees as someone in NYC would, etc.

May 28, 2009 11:41 pm
eman07:

I'm curious what is the new "standard" for fee structures?

10 years ago when RIA's were new, I think 1% was pretty much the norm.  I get the feeling that 1.25 or 1.5 may be more normal now, with standard breakpoints obviously.

Also - I would assume your location is relevant here, so list an approximate location if you don't mind.  I'm in rural midwestern America, so I wouldn't expect to be charging the same fees as someone in NYC would, etc.



The standard fee most will list on their ADVs is 1.00 to 1.5, but most will discount this number.  When I was running the advisory business at JPM, the fee was 1.5 and allowed the advisors to discount by 25%.  We did not discriminate based on location. 

Good Luck

Ash
www.FAfreedom.com - The Breakaway Experts
609-945-7100 x 101

May 29, 2009 6:59 am
eman07:

I'm curious what is the new "standard" for fee structures?10 years ago when RIA's were new, I think 1% was pretty much the norm. I get the feeling that 1.25 or 1.5 may be more normal now, with standard breakpoints obviously.Also - I would assume your location is relevant here, so list an approximate location if you don't mind. I'm in rural midwestern America, so I wouldn't expect to be charging the same fees as someone in NYC would, etc.



You assume too much.



What makes you think there is a "new" standard?



What makes you think that RIAs were new 10 years ago?



What makes you think location is particularly relevant to fees?



Not huge deal, since your question is really just 'what do most RIAs charge?', but you're bound to slow yourself down if you start out with bad assumptions. (Insert old lame joke here about what happens when you assume.)

May 29, 2009 8:08 am

A few years ago there was an article in one of the fin publications (if I can find it I will post it) that said less than 5% of people shop on price. If you offer something of value you can justify charging more.

 
I have seen very large advisors start at 3% and small time guys charge only .50%. In my wirehouse days we had a discretionary money management program where the fees started at 3% on the first 250,000.
 
If you can do it, you may want to charge on the higher side as compliance cost may skyrocket in the next few years.
 
Goggle a few of the local firms then pull up their adv on the sec site and see what the avg is in your area.
 
 
May 29, 2009 8:34 pm

i would suggest you charge as much as your market will bear (if your'e worth it).  i charge 2.5% with a $1mm relationship minimum and have no problem getting new clients.  with breakpoints, most of my clients are still paying 1.75 -but we also do all asset management in-house with individudal secuties and etfs.  if you plan on wrapping funds you'll need to charge more because anyone can do it and the funds add a lot of cost.

 
location does not matter.  i'm in a horribly cheap a** market in the midwest and people still pay.  if the alternative is cheap and crappy then expensive and good is a nice tradeoff.
 
i think the most important part of the fee conversation is your confidence in presenting what you charge.  if you him-haw and beat around the bush about fees it tells clients you aren't sure what your worth and that price is a determining factor.  it shouldn't be.  just be confident and clearly accentuate your value as though whatever the number is - it's a steal of a deal.
 
good luck
May 30, 2009 1:03 am

I think it's tough to charge over 1.5% especially after this bear market.  Unless you had people in CDs or treasuries they have the mind set (I think) that for the money they were paying you you should have avoided the train wreck.  A c-share mutual fund could have done as well.  Unless you were shorting the market and did better than most mutual fund companies out there than you just have to be a good salesman to get more than 1.5%

 
By the way what are you guys giving up in to the clearing firm?
May 31, 2009 1:30 pm

I charge 2% and with occasional discounts end up at an overal rate of 1.8%, yet when I talk with other advisors they seem to think that's high and that they couldn't "justify" that cost to their clients. That puzzles me since I think that, as brandnewadvisor indicates, the market should be your pricing mechanism. Charge as much as you can until you notice clients and potential clients balk. This is still a capitalistic system isn't it?


Many advisors, I fear, charge based on a sense of self worth or confidence.


May 31, 2009 1:36 pm

For what it's worth, I just updated my ADV and raised my fees by .25%.

 
 
Jun 1, 2009 9:30 am

I agree, I think the market is the pricing mechanism.  It's harder to compete in my market at 1.8% if you can get it that's great.

 
How much does your clearing firm take?
Jun 1, 2009 1:10 pm

Fidelity gets paid in ticket charges and 12b-1's. Since I don't use mutual funds, they get compensated simply from ticket charges.

Jun 1, 2009 2:16 pm

Hello...

I think it really depends on what type of platform you have.  If it's your typical mutual fund platform than charging a asset fee based on dollar's under management makes sense starting at 1% for assets under $100,000
However the real bread and butter comes, not from a platform like the latter but rather a model managment platform.  We charge as high as 2.5% for assets under $250,000.  How can we do this?  It's really the perception of the platform and the ability to perform well in any type of market.  UP DOWN or SIDEWAYS.  Clients prefer to know they are going to do well and they don't mind paying a little more.  Mutual funds and seperately managed accounts just don't perform well most of the time.  Hope this helps.
Jun 1, 2009 3:40 pm
advisorcontrol.comL:

Hello...

I think it really depends on what type of platform you have. If it's your typical mutual fund platform than charging a asset fee based on dollar's under management makes sense starting at 1% for assets under $100,000

However the real bread and butter comes, not from a platform like the latter but rather a model managment platform. We charge as high as 2.5% for assets under $250,000. How can we do this? It's really the perception of the platform and the ability to perform well in any type of market. UP DOWN or SIDEWAYS. Clients prefer to know they are going to do well and they don't mind paying a little more. Mutual funds and seperately managed accounts just don't perform well most of the time. Hope this helps.





HACK ALERT...



This guy peddles marketing to financial advisors... A friend of mine with EDJ, purchase his other "system" and said the box was nothing but crap... Poor presentations, word files of crappy direct mail..



P.S. I wouldn't list your real name under your ID... you might want to change that..

Jun 1, 2009 4:44 pm

Hello...


Just wanted to apologize that our site is not completed as of yet.  We have a number of videos and such that we are going to put on over the next week or so.  The site is Free and the content will be free also.  We have been sucessful seminar markets over the past 10 years and want to share this with other advisors throughtout the country.  We have a model platform for investing that has gained much attention over the past year and will be sharing that with others, but they need not buy anything as nothing is for sale.  If a firm would like to learn more about our platform we have advisors throughout the country that use it.  We are adding 50 additional advisors on our model platform.  Many use it as 20-30% of their assets under managment.  It's not UIT's but will be explained better in the video section.  Sorry if this sound like a sales letter but had to clarify as i seemed to have struck a nerve here with a few, sorry again.  Not sure exactly what some were making reference to.
Jun 1, 2009 9:47 pm

I apologize if I jumped to conclusions.. However "the name" behind all of this Jason Wenk, seems to pop up everywhere. And he bilked $1000 out of my friend for something that could have been put together for $25 and a library card...

Jun 2, 2009 10:35 pm
Squash1:

I apologize if I jumped to conclusions.. However "the name" behind all of this Jason Wenk, seems to pop up everywhere. And he bilked $1000 out of my friend for something that could have been put together for $25 and a library card...

 
Hi,
 
This is the Jason you mention.  I don't sell stuff to advisors.  A few years ago I licensed my marketing to a friend who runs the site you mention that sells the stuff that is worth a library card and $25.  I wrote this yesterday - but thought it would be good to clear my name - since you felt it necessary to put it on a forum without knowing the full story.  The dude selling stuff is Joshua; a nice guy, but not an advisor.
 
So I never made any $ on your poor friend.  Sorry he/she got bilked.
 
The advisorcontrol.comL is not me, but Len, a partner in the advisorcontrol site.  As he wrote - it's not done - but when it is it will be a free site with a lot of cool stuff for advisors that hopefully will help them out.  In the meantime we'll both hang around here a little and try to help people with questions like this original post and hopefully not get cooked for having a website as a user name (though it okay and somewhat expected if we do).
 
On to this oringal thread topic:
 
For what it's worth: charge as much as you can.  If you have good management that is unique you can charge more.  If you're wrapping funds like 99 other advisors in most towns, then you cannot.  If you can do nothing but wrap funds, then focus on the other things you do that create value for your clients.  Maybe you're a CFP and some planning is part of your asset management fee.  Or you have significant experience in tax management or income planning.  Something that feels tangible to clients.
 
At the end of the day, taking a client that isn't paying you some type of minimum fee per year is a client you shouldn't take.  The scarcity of having a higher % fee or retainer is actually a pretty powerful marketing/selling take-away.  By focusing on what you do for the client rather than what it costs I think most advisors could easily raise their fees .25% higher and make more money with less clients, while having a pretty sticky client base.
Jun 2, 2009 10:37 pm

Squash - sorry, I just realized you already got the expanation from yesterdays post.  Sorry for blabbing.

Jun 2, 2009 11:22 pm

Apologize for calling you out.. my friend quit MS yesterday and sent me all of his marketing stuff he had every spent money on..



If you were able to build your business using that stuff, your are king of the pimps..

Jun 3, 2009 12:02 am
Squash1:

Apologize for calling you out.. my friend quit MS yesterday and sent me all of his marketing stuff he had every spent money on..



If you were able to build your business using that stuff, your are king of the pimps..



I'm not sure what your friend got - but I wonder if it would be compliant if I referred to myself as Jason - King of All Pimps.  That would be pretty sweet.

On a more serious note, the quality of what is used in marketing is not nearly as important as doing some.  If you spend enough money doing crap (but doing it really often and getting some type of roi that makes even a modicum of profit) then it will work.  Most people are just too lazy to do something.  It could be cold calling or crappy marketing - most people are just too lazy to do it.

All the best,

J- king of all pimps (just trying this out)

Jun 9, 2009 9:37 pm
advisorcontrol.comL:

Hello...

I think it really depends on what type of platform you have.  If it's your typical mutual fund platform than charging a asset fee based on dollar's under management makes sense starting at 1% for assets under $100,000
However the real bread and butter comes, not from a platform like the latter but rather a model managment platform.  We charge as high as 2.5% for assets under $250,000.  How can we do this?  It's really the perception of the platform and the ability to perform well in any type of market.  UP DOWN or SIDEWAYS.  Clients prefer to know they are going to do well and they don't mind paying a little more.  Mutual funds and seperately managed accounts just don't perform well most of the time.  Hope this helps.
 
Thats great until the market collapses and your clients lose 25% when their multi-sector bonds with the 7% dividends drop 30%.  You'll get 25 complaints from clients who say they invested with you because you charge higher for the privilege of doing well even in down markets. 
 
I'm beginning to agree with the part about the separately managed accounts.  The ones available to us are fighting to the death to almost keep pace with their indexes.  We're giving them another few quarters before maybe putting the kibosh on the whole SMA fad.