What are Performance Fees in the context of a Registered Investment Advisor (“RIA”)?

Definition: Performance Fees are a type of fee arrangement an RIA can enter into with a client where the RIA’s fee, for the services they provide the client, are calculated based on the performance of the client’s investment account. It is typically calculated as a % of the increase in value of the client’s investment portfolio managed by the RIA.

When used in an RIA context: “Where appropriate, the RIA utilizes a performance fee arrangement with some of the firm’s clients.”

See also: Episode 33, Episode 126