Outdated Fee Schedules and Contract-Disclosure Misalignments
Definition
Advisors use outdated lower fee schedules for proposals while official Form ADV filings list higher rates, spilling revenue due to poor version control. Inconsistencies between Form ADV, advisory agreements, and billing practices create revenue gaps and compliance risks. SEC enforcement actions highlight cases of misleading compensation disclosures tied to fee-based programs.
Key Findings
- Financial Impact: Difference between outdated proposal rates and entitled higher fees (recurring annually)
- Frequency: Monthly - embedded in ongoing billing
- Root Cause: Weak internal communication, undocumented advisor deals, and disconnect between legal disclosures and billing systems
Why This Matters
This pain point represents a significant opportunity for B2B solutions targeting Investment Advice.
Affected Stakeholders
Advisors, Legal/compliance teams, Billing administrators
Deep Analysis (Premium)
Financial Impact
$10,000–$22,000 annually (10-15 trust clients × $1M–$2.5M AUM × 0.25–0.35% underbilling due to rate confusion) • $12,000–$28,000 annually (100-150 mass affluent clients × $250k–$500k AUM × 0.20–0.30% gap; plus refund disputes) • $12,000–$28,000 annually per firm (trusts $1M–$3M average AUM × 15-25 active trusts × 0.20–0.40% rate gap)
Current Workarounds
Compliance Analyst manually compares current proposal samples (pulled from shared drive or email) against ADV Form Item 5 fee schedule; finds mismatches; creates amendment request; no systematic process to flag all affected client agreements • Copy-paste from previous year's proposal template without updating rates; Word document version control failure; advisor verbally overrides rates in billing conversation • Endowment manager sends spreadsheet with current market values; Billing Admin manually recalculates tiers; Paper contract pulled from files to verify rate
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Methodology & Sources
Data collected via OSINT from regulatory filings, industry audits, and verified case studies.
Related Business Risks
Mispriced AUM Fees Due to Inconsistent Discounts and Household Aggregation Failures
Overbilling Due to Household Aggregation Failures Leading to SEC Risk Alerts
SEC Examinations Failing Best Execution Documentation Requirements
Suboptimal Trade Execution from Inadequate Broker-Dealer Evaluations
AML Screening Audit Failures and Enforcement Actions
Facilitated Money Laundering via Weak AML Screening
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