Cost per client? Why Fidelity asks RIAs to do the math

Many registered investment advisors are spending too much and missing out on new business by forgetting to calculate their costs per client, according to Fidelity’s practice management arm.

Sign up here to receive Financial Planning's complete newsletter — delivered to your inbox daily.

The median cost to serve clients is $8,000 per year when including everything from the compensation for employees working on the accounts to the software, funds and other products and services needed for planning and portfolio management, Fidelity Institutional’s practice management unit found in surveys among its thousands of RIA clients. Roughly half of the households an RIA serves are not profitable, and their average income per client is only $4,500.

Fidelity didn’t ask the client RIAs that use its custodian to itemize the expenses within their reported totals, but the firm has concluded from other benchmarking studies that payroll is their most significant cost, with real estate and software as the next largest outlays.

For more: Why Fidelity's RIA consultants ask about a practice's cost per client

In other news: