Negotiated fees and fee exceptions: how a small RIA records them so billing stays right
A fee exception is any client whose fee differs from your standard schedule: a negotiated rate, a waived account, a family or staff discount, or a cap. A small RIA should record each exception on the client's billing record with the rate, the accounts it covers, the start date, any end date, the reason and the document that agrees it, and make sure the advisory agreement says the same thing. Review all exceptions once a year so none outlive their reason.
Almost every small firm has a handful of clients on a different fee. The founder's first client, still on the rate from 2014. A family that negotiated a cap. A staff member's parents billed at half rate. Each was agreed for a good reason. The trouble starts when the only record is the founder's memory and a formula in a spreadsheet cell.
What counts as a fee exception?
| Type | Example |
|---|---|
| Negotiated rate | 0.75% instead of the standard 1% on the first tier |
| Fee cap | Fees capped at a set dollar amount a year |
| Waived account | A small custodial account billed at zero |
| Family or staff discount | Half rate for an employee's parents |
| Legacy schedule | An older fee schedule kept for long-standing clients |
| Temporary concession | A fee waived for one quarter after a service problem |
What should each record show?
- The client and the accounts it applies to.
- The exception: rate, cap or waiver.
- Start date and, if it has one, end date.
- The reason, in a sentence.
- The document that agrees it: advisory agreement, amendment or signed letter.
- Who approved it.
How do you keep billing right?
- Keep exceptions on the billing record, not in a separate note.
- Check each exception against the agreement when it's set up.
- Flag temporary exceptions with their end date so they come off on time.
- Review all exceptions once a year, ideally before the fourth-quarter bill.
A worked example
Take a hypothetical two-person RIA with nine fee exceptions. In its annual review the operations lead lists them all with their documents. Seven match their agreements. One, a quarter's waiver after a delayed transfer, should have ended a year ago and is still being applied; it comes off with a note to the client. Another, a negotiated rate agreed by phone, has no signed amendment; the advisor sends one for signature. Each exception now carries its dates and document on the billing record.
What are the common gaps?
- Exceptions that exist only in a spreadsheet formula.
- Temporary waivers that never end.
- A negotiated rate with no matching agreement.
- Nobody able to list every exception on request.
When is this overkill?
If every client pays the standard schedule, you don't need it. The first exception you agree is the time to start the list.
How Advorra fits
Advorra runs quarterly billing in arrears with exclusions recorded on each account, and keeps every billing run on a billing blotter, so you can see how each client's fee was calculated in any past quarter. See the product page, or read about changing your fee schedule and the advisory agreement, read by operations.
One thing to do this week: list every client who doesn't pay your standard fee, and the document that says so.
An operations guide, not legal or compliance advice. Your advisory agreement and disclosures set the fees you may charge.
Questions advisors ask
Do fee exceptions need to be in the advisory agreement?
The fee a client pays should match what their agreement says. If you agree a different rate, document it in the agreement or a signed amendment. Your compliance consultant can advise on the wording.
Should exceptions be disclosed?
Many firms describe in their brochure that fees may be negotiable. Check that your disclosures match your practice.
What about family members of staff?
Record the discount like any other exception, with its reason and dates.
How often should exceptions be reviewed?
Once a year, and whenever a client's circumstances change. A discount agreed for a reason that no longer applies should be revisited with the client.
Is this compliance advice?
No. It is an operations guide.
See it on a demo firm
Advorra is practice software for independent RIAs: clients, models, IPS, billing and compliance records in one place, on top of the custodian you already use. Built by The CollabHub.
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