Page 3 - Investment Advisor February/March 2023

02.23

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RIAs Open to New Billing Methods: Study

RIA firms are increasingly trying billing
systems beyond the traditional quarterly
method that’s been used in the sector for
many years thanks to the introduction of
technology that has made it significantly
easier for advisors to use other billing
systems, according to a new white paper
by Advyzon called “What Fee Models
Are Advisors Using?”
For instance, one clear takeaway is
there are “many, many ways that advisors
are billing their clients” today, according cash flow for the advisor, the advisor now officially do in the paper … these trends
to Charles Rowlan, senior vice president gets paid 12 times a year, but they’re tak- are compounded.” Among breakaway RIA
of business development at Advyzon and ing 12 snapshots a year, which is likely firms, the percentage of those firms that are
the main author of the white paper. “I more fair to both parties as well. And “electing to go with monthly billing, average
don’t think any particular way is right or that’s even compounded with the use of daily billing [and] flat-rate billing is even
wrong,” he said. “I think advisors have lots a daily average billing.” higher than what the study would show.”
of choice depending on what works best Noting that it’s the second time The data point that stood out most from
for the advisor as well as their end client.” Advyzon has issued this type of study, the study for Rowlan was that the percent-
The largest driver behind this change Rowlan said it’s “pretty intriguing that age of RIA firms using average daily bal-
has been technology, he said. “One of the flat-fee monthly billing and average daily ances grew from 16% in 2021 to 19% in
reasons why there’s more variability in are [both] trending up.” Meanwhile, 2022, he said. “That’s going to be one of
billing styles than there once was is due “another thing that I think we can provide those metrics where, if you were to look
to technological tools that give advisors more data around in future years” of the backwards and go back several years ago,
the ability to use some of these styles that planned annual study is “these different the percentage of firms that were using an
were once less popular. They’re becoming billing styles — particularly monthly bill- average daily balance was close to zero.”
more popular because they’re not as hard ing, average daily, flat-fee — they’re even But Rowlan explained: “Average daily bill-
to execute as they once were.” more popular [among] breakaway firms.” ing is an extremely fair way to bill for both
But we’re also “seeing advisors make The study was based on about 1,000 the client and the advisor. I believe that it’s
choices” now when it comes to billing RIA firms. “This is not a survey,” he very difficult to find an objection to billing
“to basically smooth out their cash flow,” stressed, noting: “We didn’t send out a using that [method] other than ‘I don’t
Rowlan pointed out. “More advisors survey and allow advisors to respond back have the tools to make it happen.’” Another
are choosing things like monthly billing. with how they bill.” Rather, Advyzon is able data point from the study that stands out
More advisors are choosing flat-fee bill- to “look at live data and see how firms are to him is that the percentage of RIAs using
ing. So they’re taking out some of the actually billing” thanks to its billing tech a flat fee grew from 26% to 39% in 2022.
variability in their billing.” tools, he said. Of the firms that Advyzon He was quick to point out that doesn’t
Prior to this, the “traditional billing serves, about 33% are breakaway firms. mean that percentage of firms was using
mechanism has always been quarterly in “The other two-thirds are … firms that are a flat fee exclusively. “What this means
advance [in which] advisors were being existing RIA firms [that] have been around is that this percentage of firms are using
paid four times a year and account bal-
flat fees with at least one client. [But it’s]
for a while,” Rowlan explained.
Adobe Stock ances were being evaluated four times the data that’s in this study and you look still significant that many firms are lever-
With that in mind, he noted: “If you take
aging a flat fee in at least some cases”
a year,” he noted. “Moving to a monthly
at it in those buckets, which we didn’t
billing [cycle] not only smooths out the
now. —Jeff Berman
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