Question for RIAs on Compliance
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Compared with what I’m paying at the b/d, LPL’s looked cheap. I don’t like the approximately 10% haircut for smaller RIA, though.
Can anyone illuminate the big picture on differentiating between investment fees and financial planning fees? If I'm with a b/d, my impression is that my wrap fees are supposed to be about providing investment advice on the AUM. I can include financial planning, but the fee isn't for broader planning? If I'm RIA, I just charge whatever fee - 1.25% or whatever - and I can say it's for whatever the ADV describes - which could specifically include financial planning, or I can break out a separate financial planning fee, and bill the account? Thanks for the discussionThe big picture difference between investment fees and planning fees is pretty much as you said it: an RIA may charge a fee just for planning - quite apart from any fees they may or may not charge for managing the money - so long as it is disclosed on the ADV and to the client. Or they can charge only an advisory fee that encompasses only investment management or both investment management and planning - again, so long as it’s consistent with their ADV/disclosures. Some only do it one way, others only do it the other, some offer both. It’s up to you - a novel concept after having a b/d dictate what you may or may not do.
Keep in mind that neither of these fees are the same as what you know as a wrap account. There are subtle but important legal distinctions. But that’s the little picture.
[quote=Morphius]The big picture difference between investment fees and planning fees is pretty much as you said it: an RIA may charge a fee just for planning - quite apart from any fees they may or may not charge for managing the money - so long as it is disclosed on the ADV and to the client. Or they can charge only an advisory fee that encompasses only investment management or both investment management and planning - again, so long as it’s consistent with their ADV/disclosures. Some only do it one way, others only do it the other, some offer both. It’s up to you - a novel concept after having a b/d dictate what you may or may not do.
Keep in mind that neither of these fees are the same as what you know as a wrap account. There are subtle but important legal distinctions. But that’s the little picture.[/quote]
Additionally be careful with your agreements. There is a requirement for advisors to Know their Clients. Many advisors will use a shortened planning process for this requirement. If you are charging for planning as a service, make sure the terms you use are different for the two processes. Clients get confused very quickly and will use this to take you to arbritation.
Good Luck
ash
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Does anyone ever hire an inhouse Compliance Officer for their RIA (or branch if with in independent)? If so, what kind of compensation arrangement is there?