Some firms could see nearly $30,000 in new costs, but the majority of the more than 32,000 advisors registered with the SEC and state regulators would face little or no extra expense if Congress allowed the SEC to collect user fees to fund exams, according to an analysis by RIA in a Box.

The compliance firm's analysis notes that the Investment Adviser Examination Improvement Act of 2013, which would allow the SEC to assess a user fee on advisors, would only impact around 11,500 SEC-registered RIA firms, which means the majority of firms, which are registered with the states, "would not be impacted at all."

The annual increased cost to RIA firms for user fee-funded examinations would be around $310 million, with an average cost per firm of $27,013, RIA in a Box estimated in a blog post, and firms would pay a higher or lower user fee based on their assets under management.

As the analysis points out, while there a number of exceptions, in general investment advisory firms with $100 million or more in assets under management register with the SEC, while firms with less than $100 million in AUM register with the relevant states.

To reach the $310 million figure, RIA in a Box assumed a three-year examination cycle and calculated the number of user-fee funded exams for 2015 to be 2,897, RIA in a Box President G.J. King told ThinkAdvisor. (The SEC performed 964 audits in 2013, and the bill only authorizes fees to fund additional exams.)

Assuming that the main — but not the single — criterion for calculating a firm's annual user fee is AUM, the compliance firm estimates that with a total incremental annual cost of $310 million and $55 trillion of total AUM across 11,500 firms, the annual cost per $1 million of AUM comes out to $5.65. That means that a firm with $500 million in AUM would pay an annual user fee of $2,824, while one with $2.5 billion in AUM would pay $14,121.

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Melanie Waddell

Melanie is senior editor and Washington bureau chief of ThinkAdvisor. Her ThinkAdvisor coverage zeros in on how politics, policy, legislation and regulations affect the investment advisory space. Melanie’s coverage has been cited in various lawmakers’ reports, letters and bills, and in the Labor Department’s fiduciary rule in 2023. In 2019, Melanie received an Honorable Mention, Range of Work by a Single Author award from @Folio. Melanie joined Investment Advisor magazine as New York bureau chief in 2000. She has been a columnist since 2002. She started her career in Washington in 1994, covering financial issues at American Banker. Since 1997, Melanie has been covering investment-related issues, holding senior editorial positions at American Banker publications in both Washington and New York. Briefly, she was content chief for Internet Capital Group’s EFinancialWorld in New York and wrote freelance articles for Institutional Investor. Melanie holds a bachelor’s degree in English from Towson University. She interned at The Baltimore Sun and its suburban edition.