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Fee Models for FAs Are Inconsistent State by State

September 1, 2017

State regulators apply various standards to how financial advisors can charge client fees, and some advisors are calling for the North American Securities Administration Association to step in, InvestmentNews writes.

Some states, including Utah, don’t let advisors charge fees based on a client’s net worth, Michael Kitces, partner and director of research at Pinnacle Advisory Group Inc. and co-founder of the XY Planning Network, tells the publication. Allowing such fees would permit advisors to charge differently for seemingly the same service, Utah regulators told Alan Moore, XYPN co-founder, according to InvestmentNews. They also told Moore they won’t allow fees tied to a client’s income or the complexity of their needs. Publicly, Utah regulators have said they may also take issue with variable or negotiable hourly fees, according to the publication.

Other states only let advisors charge a flat fee or an asset-based fee but not both, while permitting companies to charge both, according to InvestmentNews. And some states have rejected plans by companies to charge a one-time planning fee combined with an asset-based fee, the publication writes. Other state regulators have taken issue with fee-only advisors charging above $150 per hour, InvestmentNews writes. Advisors who charge an asset-based fee can often generate up to three times that amount per hour, Kitces tells the publication.

Michael Kitces

XYPN is now asking NASAA to address the discrepancies, although it will still remain up to the states to adopt any changes, according to InvestmentNews. A NASAA spokesman tells the publication the differences by state could be tied to the difference in services advisors offer in each one. But he also says the association is open to looking into the issue, according to InvestmentNews.

By Alex Padalka
  • To read the InvestmentNews article cited in this story, click here.