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Ensuring Correct Fee Rates: Issue #3

Being audited is stressful enough—don’t let your billing process add alarm.

January 30, 2019 |

BillFin is committed to helping advisors calculate and collect accurate management fees from their clients while helping you understand the fee billing process. This is a continuation of a six-part series discussing the risk alert issued by the SEC last April noting six common errors found in reviewing financial advisors’ fee billing and compliance. Continue reading for details on how BillFin helps with fee rates.

Fee Schedules

Financial advisors have many options when deciding how much they will charge their clients. We have seen all sorts of rates and procedures for calculating management fees. We call these different rates and associated procedures a “fee schedule.” Based on our industry experience, BillFin offers the four most common fee schedule options:

  1. Flat Rate – a flat percentage that gets applied to the full amount of a client’s or account’s billable assets
  2. Flat Amount – a dollar amount billed regardless of a client’s or account’s billable assets
  3. Blended Tiered Rate – a graduating scale of different rates being applied to partial amounts of a client’s or account’s billable assets
  4. Unblended Tiered Rate – picking a flat rate to apply to the full amount of a client’s or account’s billable assets based on a graduating scale of different rates for increasing asset values

After you input your different fee schedules, BillFin allows you to assign clients quickly and easily. BillFin also allows using different fee schedules for accounts within the same household. Users have maximum flexibility to ensure each household is billed correctly regardless of how many accounts have a separate and unique fee schedule.


Another piece of the calculation process is prorating fees. BillFin allows layers of flexibility here too. Since a Form ADV usually presents clients with fee schedule rates as annual percentages, BillFin will prorate that annual rate for your billing periods. Users simply select actual days proration or standard proration depending on their preference. In simple terms, this means BillFin will calculate fees based on 30 days in November and 31 days in December (if billing on a monthly basis) or 90 days for Q1 and 91 days for Q2 (if billing quarterly) when using actual days proration. Alternatively BillFin will calculate fees by dividing the rate by 12 (if billing monthly) or dividing by 4 (if billing quarterly) when using standard days proration.

BillFin adds a layer by prorating new accounts as they open. For any account that opens mid-period, you can select the start billing date to avoid billing for a full opening period. Just another way to make that auditing team smile.

Non-Billable Accounts, Asset Exclusions & More

The flexibility doesn’t end there.  Let’s make a quick list of other parameters BillFin handles that affect your fee rate:

  1. Users can either ignore accounts entirely for billing or make accounts non-billable. The non-billable accounts will still be present on an invoice.
  2. Users can identify specific holdings within an account that are not billable.
  3. Users can ensure assets aggregate for a better effective rate against a tiered fee schedule.
  4. Users can setup discounts.
  5. Users can quickly check the math with BillFin’s simple and comprehensive views of all the details involved in each fee’s calculation.

With so many options for different rates and proration needs, you need a system that will track all components that go into the fee calculation. BillFin makes setup easy. You enter your fee schedule; you select if you bill monthly or quarterly; you select how you prorate; and BillFin remembers it all. It’s a system dedicated to financial advisors’ needs and it’s programmed to get and use the correct rates every billing cycle. That is what you should expect from a superior billing system created specifically for financial advisors and RIA’s with complex management fees.


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