While the lion’s share of advisors’ revenues continues to come from getting paid as a percentage of assets under management, RIAs are increasingly interested in supplementing revenue with other fee sources, according to a new survey.
Nearly all (94%) of RIAs are getting paid as a percentage of assets under management, according to an inaugural survey of advisory firms around the country from RIA in a Box, a compliance and registration firm. The report found that 55% of surveyed advisors also charge their clients on an hourly basis, 43% charge fixed fees and 10% receive performance-based fees.
Even though this survey is the first for the 8-year-old firm, RIA in a Box chairman Will Bressman said that he’s seeing increased interest from firms seeking income to supplement the traditional AUM fee. “We’re seeing hourly and fixed fees being used more with smaller clients and for other discreet services,” Bressman said.
SEEKING ALTERNATIVE SOURCES
California advisor Boris Blum agreed.
“Everybody is struggling to add more revenue sources,” said Blum, president and chief executive of Wealth Planning and Management in Woodland Hills, Calif. “Asset growth has slowed as clients have become more cautious. We are charging fixed fees for special projects. It’s an approach clients seem to like more than hourly fees.”
The RIA in a Box study also found that 37% of RIAs surveyed have staff members who sell insurance products, and 11% offer accounting services through an affiliated entity; 9% sell securities through a registered broker-dealer. Only 3% of the surveyed firms offer legal or real estate brokerage services.
Bressman said he expects RIAs to sell fewer commission-based products in the years ahead, as more advisors migrate to an independent model -- but Blum wasn’t so sure.
“Depending on your client base, there may be services you can offer that they really appreciate,” he said. “For example, many of our clients are business owners and high-net-worth individuals with an interest in California real estate, and both real estate and property management have become a significant piece of our business.”
Bressman declined to give a specific number the study was based on, but did say it was a “statistically significant” survey of between 500 and 1,000 advisors in all 50 states.