If the scheme being pushed by Rep. Maxine Waters (D-Calif.) and others to impose a new user fee to pay for an expansion of the SEC’s investment advisor exam program is adopted, the average annual cost per SEC-registered firm would be $27,013, RIA consultant RIA in a Box estimates. The total cost: around $310 million.
The good news: While the $27,013 number is an overall average of the 32,000 RIA firms registered at the SEC and state levels, the largest RIAs would absorb most of the total cost, since the fee would be based on AUM. (The RIA in a Box report estimates the average annual cost at $5.65 per $1 million of AUM.) For example, Vanguard, the largest RIA with $2.35 trillion in AUM, would be facing an annual user fee of about $13.268 million; PIMCO would be looking at a fee of about $11.017 million. According to the report, this factor would mean that “the vast majority of the 32,000 RIA firms … would be faced with little or no expense.”
In the report, RIA in a Box carefully explains its math and assumptions. It also flags six variables that could affect the ultimate outcome and create problems:
- If wire houses, banks and large asset managers succeed in influencing the legislation.
- If dually registered firms are excluded.
- If the SEC sets a minimum annual per-firm fee regardless of AUM.
- If the increase in exam staff proves difficult and costly.
- If expansion of SEC staff also needs to be funded.
- If the SEC switches to a two-year audit cycle.
