Creating fee structures in the platform is an easy and convenient way to bill clients assets under management. This article will give a high level understanding of each section required to build fee structures in the platform:
Name - You can name your fee structure based on preference. This will be shown when assigning the fee structure to any accounts in the system. The client will not see the name of the fee structure so we suggest naming it something you can easily identify.
Collection Type - This is where the RIA can allocate when the billing will be run in the system. There are 3 options available to be assigned:
- Advance - Billing will be run at the beginning of the selected frequency time frame. If you selected monthly or quarterly the fee will be charged at the beginning of the selected timeframe.
- Arrears - Arrears designates that we will charge the clients account after month or quarter end. The billing will be run at the end of the selected frequency covered in section below
- Advance with Proration: Billing will be run in advance but be prorated based on when the fee structure is assigned to the account. If the fee structure is assigned half way through the selected frequency timeframe, the fee structure will be run on the remaining time left.
Structure - The Structure section allows you to assign how the platform will charge fees from client accounts. There are 5 different options defined below:
- Drop Through - The Drop Through fee structure means once a certain threshold is reached, the entire account will be charged this amount. For example if an account has 750k and the following structure:
- 0-500k - 1.25%
- 500k-1M -1%
- $1M-5M - .8%
- The account would be charged the 1% on the entire 750k.
- Flat Amount - This fee structure charged a flat dollar amount to the client account. You can set 3k,5k, 10k and this amount will be charged and broken down either monthly or quarterly depending on the frequency selected.
- Flat Rate - This fee structure charges a flat % on client accounts. You can set a % you would like the entire account to be charged. For example, if we set this to 1% on a 500k account the yearly fee taken would be 5k.
- Free Fee - This is utilized if you do not wish to charge fees to any accounts on the platform.
- Tiered Fee - The most common structure utilized on the platform. This allows you to charge % fees based on AUM on the platform. For example on a 750k Account with the following breakpoints:
- 0-500k - 1.25%
- 500k-1M - 1%
- 1M+ - .8%
- The first 500k would be charged at 1,25% for $6250
- The next 250k would be charged at 1% for $2500
- Total fee - $8,750
Valuation Type - We offer 3 different valuation types when building a fee structure. This section is where you can assign the billable amounts to be charged from client accounts. The 3 definitions for each are provided below:
- Average Daily Balance - Takes the average balance of the account throughout the selected frequency.
- End of Period Balance - The billable amount will be the amount of assets in the account at the end of the selected frequency
- End of Period W/ Adjustments Flows - The billable amount will be calculated with the value at the end of the selected frequency period. This however takes into account cash flows that have settled throughout the selected time period.
Billing Frequency - The billing frequency allows for RIAs to highlight when they would like fees to be collected out of client accounts. There are 2 different options to select:
- Monthly - The billing will be run every month and collected out of the clients accounts.
- Quarterly - The billing will be run every 3 months and collected from client accounts
Quarterly Cycle - This is only available if the billing frequency selected is Quarterly. This allows the RIA to designate their quarterly cycles. It's important to note it's asking for the LAST month of the quarter, not the first.
Feb - May - Aug - Nov:
Quarter 1: Starts December 1, ends February 28/29
Quarter 2: Starts March 1, ends May 31
Quarter 3: Starts June 1, ends August 31
Quarter 4: Starts September 1, ends November 30
Jan - Apr - Jul - Oct:
Quarter 1: Starts November 1, ends January 31
Quarter 2: Starts February 1, ends April 30
Quarter 3: Starts May 1, ends July 31
Quarter 4: Starts August 1, ends October 31
Mar – Jun – Sep – Dec:
Quarter 1: Starts January 1, ends March 31
Quarter 2: Starts April 1, ends June 30
Quarter 3: Starts July 1, ends September 30
Quarter 4: Starts October 1, ends December 31