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September 15, 2021 at 05:03 PM
What You Need to Know
- The trend appears to be tilting toward a set rate, according to a white paper from Advyzon.
- Fifty-two percent of firms surveyed favor advance billing, while 46% bill in arrears.
- Quarterly billing creates potential for big revenue fluctuations in volatile markets, which may explain the trend toward flat fees.
Charging a flat fee for services is a topic of heated debate among advisors. Now the trend appears to be tilting toward a set rate, according to a new white paper from Advyzon, a technology provider for RIAs.
Twenty-six percent of firms in a survey of about 1,000 of Advyzon’s clients reported that they now use a flat fee in some capacity.
“It was higher than expected,” Charles Rowlan, Advyzon’s senior vice president of business development, said in a statement. “The trend is definitely moving more toward incorporating some type of flat-fee element.”
Flat fees are more popular with firms managing more than $100 million in assets, according to the survey, with 36% using them, compared with 25% of all firms. The bigger firms are also more likely to have multiple fee schedules, although these are popular with firms of all sizes: 89% versus 81%.
Billing Preferences
The research also looked at trends in asset-based fees and billing. Overall, 52% of Advyzon firms favor advance billing, including 60% of larger firms, while 46% bill in arrears; 47% of smaller firms bill both in advance and in arrears.
Quarterly billing based on either beginning or ending balances remains the industry standard, with 74% of firms that work with Advyzon using a quarterly model.
