As RIA firms grow and attract larger customers, $2 million in client AUM is the cut-off above which pricing rises favorably for RIAs, according to a new study.

“In general, smaller firms may use competitive pricing as a means to grow aggressively,” according to the authors of the study by Fidelity Institutional Wealth Services, which polled 308 RIA firms last spring.

The largest firms, those with at least $1 billion in AUM, demonstrate the strongest pricing power based on their asset management fees, according to the study. And at $2 million and above in AUM, fees for services rise consistently.

Conversely, firms with less than $100 million in AUM are using lower costs to compete.

There are several possible reasons for the pricing differential, the study’s authors found:

  • Larger, established firms increasingly leverage their brand reputation to set higher fees.
  • Larger firms require additional resources to deliver the extra services offered as part of the overall investment management fee.
  • Firms with far fewer high-net-worth clients may be willing to charge less to win bigger accounts.

Register or login for access to this item and much more

All Financial Planning content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access