Your fourth-quarter billing run, checked: a pre-run list for small RIAs
Before running fourth-quarter advisory fee billing, a small RIA should check what changed during the quarter and the year: new and closed accounts and their dates, changes to household grouping, exclusions, any fee schedule changes or negotiated rates that start in January, and accounts on hold. Have a second person check a sample against the agreements, then keep the calculation for every bill. Year-end is when changes pile up, so this run deserves an extra hour.
The fourth-quarter bill tends to carry the year's loose ends. A client opened an account in November. Another closed one in December. A household split after a divorce. A negotiated rate starts in January but was entered in the billing sheet in December. Any one of these is easy to handle. All of them in the same run, done in a hurry in early January, is where mistakes happen.
The pre-run checklist
| Check | What you're looking for |
|---|---|
| New accounts | Opening dates, so proration starts on the right day |
| Closed accounts | Closing dates, and the final bill as the agreement says |
| Household changes | Accounts added or removed from a group |
| Exclusions | Cash, held-away or limited-purpose accounts still excluded correctly |
| Fee changes | Any new rate applies from its effective date, not earlier |
| Negotiated rates and waivers | Temporary waivers that should have ended |
| Holds and special cases | Accounts of clients who died or left during the quarter |
The second-person check
- Pick a sample: every new or closed account, every household that changed, and five others at random.
- Compare each against its agreement: rate, exclusions, grouping, period.
- Check a few totals by hand.
- Sign off, with a note of what was checked.
After the run
- Keep the calculation for every bill, not just the totals.
- Note anything unusual for the next run.
- If a client asks about their fee, the record is ready.
A worked example
Take a hypothetical two-person RIA billing in arrears. Before the fourth-quarter run, the operations lead lists the quarter's changes: three new accounts, one closure, one household split, and a negotiated rate starting in January. The calculation is run; the advisor checks the six changed items and five random households. One problem turns up: the new January rate had been applied to the fourth quarter. It's corrected before the file goes to the custodian.
What are the common gaps?
- Running the year-end bill the same way as any other quarter.
- No second check because "it's only two of us".
- Calculations overwritten when next year's sheet is started.
When is this overkill?
If nothing changed in the quarter, a quick check of the totals may be enough. Most firms have at least a few changes by year-end.
How Advorra fits
Advorra runs quarterly billing in arrears with exclusions recorded on each account and keeps every run on a billing blotter, so the changes and the calculation behind each bill are there to check. See the product page, or read about prorating fees and fixing billing errors.
One thing to do this week: start a list of this quarter's account openings, closings and fee changes, so it's ready in January.
An operations checklist, not legal or compliance advice.
Questions advisors ask
Why is the fourth-quarter run riskier?
Year-end brings more account openings and closings, client gifts and withdrawals, and fee changes that take effect in January. More changes mean more chances for an error.
Who should do the second check?
Someone other than the person who ran the calculation, even in a two-person firm.
Should January fee changes apply to the fourth quarter?
Usually not, if billing in arrears for the fourth quarter. Check the effective date in the client's agreement.
What if we find an error after billing?
Work out the difference, correct it, tell the client and record it.
Is this compliance advice?
No. It is an operations checklist.
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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