Fee Disclosures: How to Stay Transparent and Compliant

Clear and accurate fee disclosures are essential for building client trust and meeting regulatory expectations. For Registered Investment Advisers (RIAs), fee transparency isn’t just good business—it’s a legal requirement.

With the SEC and state regulators placing increased scrutiny on how fees are described, calculated, and charged, now is the time to revisit your firm’s disclosure practices.

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### 💡 Why Fee Disclosure Matters

Clients need to understand how they’re being charged—and regulators expect you to explain it clearly. Inadequate or misleading disclosures can result in enforcement actions, client disputes, or reputational damage.

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### 📄 Where Fee Disclosures Appear

Your fee disclosures must be consistent across all platforms and documents, including:

- Form ADV Part 2A (Brochure)

- Advisory agreements

- Firm website and marketing materials

- Performance reports and client statements

- Pitch decks and onboarding documents

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### 🧾 Key Elements of Effective Fee Disclosure

1. **Clarity**

Use plain language. Avoid legal jargon or vague descriptions.

2. **Fee Types**

Clearly identify each type of fee:

- Asset-based fees (e.g., 1% of AUM)

- Flat fees

- Hourly fees

- Performance-based fees (if applicable)

- Third-party or platform fees

3. **Calculation Method**

Explain how fees are calculated:

- Based on ending or average daily balance?

- Prorated for partial periods?

- Tiered or breakpoint pricing?

4. **Billing Frequency**

State when fees are charged:

- Monthly or quarterly?

- In advance or in arrears?

5. **Payment Method**

Describe how fees are collected:

- Direct deduction from client account?

- Invoiced for manual payment?

6. **Fee Negotiability**

Indicate whether fees are negotiable and under what circumstances.

7. **Termination Policy**

Disclose what happens to fees upon contract termination.

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### 🔍 Common Disclosure Pitfalls

- Charging a fee not disclosed in Form ADV

- Using outdated fee language in advisory agreements

- Failing to explain third-party fees (custodial, platform, mutual fund expenses)

- Misstating or omitting performance-based fee details

- Inconsistencies across documents

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### 🔁 Staying Compliant: Best Practices

- Regularly review and update Form ADV and client agreements

- Compare disclosures across all client-facing documents for consistency

- Conduct periodic fee audits to ensure billing accuracy

- Clearly disclose all third-party and layered fees

- Train staff on how to explain fees to prospects and clients

- Document all fee arrangements and any client-specific negotiations

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### 🛡 What Regulators Expect

Examiners will look for:

- Fee disclosures that match billing practices

- Transparency in performance-based and affiliated product fees

- Evidence of client consent for fee deductions

- Disclosure of any potential conflicts related to compensation

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### Final Thoughts

Transparent fee disclosures are a cornerstone of ethical advisory practice and regulatory compliance. Clients deserve to know exactly what they’re paying—and regulators require you to tell them.

By keeping your disclosures clear, consistent, and current, you reduce the risk of exam findings and foster stronger client relationships.

Take the time to review your firm’s fee disclosures today—because clarity is compliance.