How to Substantiate "Lower Fees Than Competitors" Claims in 2025: A Dual FTC + SEC Marketing Rule Playbook for RIAs

Making fee comparison claims in your RIA marketing materials feels like walking a tightrope. You want to highlight your competitive advantage, but one misstep could land you in hot water with regulators. The stakes are higher than ever, with consumer fraud losses topping $12.5 billion in 2024, up 25% from the year before (Truth in Advertising). Investment scams led with $5.7 billion in losses, making regulators particularly vigilant about misleading financial services marketing.

The good news? You can absolutely make "lower fees than competitors" claims. But you need rock-solid substantiation that satisfies both the FTC's reasonable-basis doctrine and the SEC Marketing Rule's stringent requirements. This playbook walks you through every step, from data collection to documentation, so you can confidently back up your fee claims when regulators come knocking.

The Regulatory Landscape: Why Fee Claims Matter More Than Ever

The regulatory environment around marketing claims has tightened significantly. The FTC filed 43 complaints in FY 2024 and obtained 93 permanent injunctions against companies and individuals for deceptive marketing (Truth in Advertising). Meanwhile, fintech app Cleo AI recently agreed to pay $17 million to settle FTC allegations that it misled consumers about how much cash they'd get and how fast they'd get it (Cleo AI Agrees to $17 Million Settlement with FTC).

For RIAs, the stakes are particularly high because fee transparency directly impacts investor trust. Only 50% of consumers said in 2023 that they trust the brands they use (Truth in Advertising). When you make comparative fee claims, you're not just marketing your services, you're making a promise that could influence major financial decisions.

The SEC Marketing Rule, which became effective in May 2021, has broadened the definition of 'advertisement' to include any communication offering investment advisory services to potential clients or promoting new services to existing clients (SEC Marketing Rule Compliance: Essential Tips For RIAs). This means your fee comparison claims in pitch books, websites, and even one-off presentations to prospects all fall under regulatory scrutiny.

Understanding the FTC's Reasonable-Basis Substantiation Doctrine

The FTC's substantiation doctrine is pretty straightforward: you need competent and reliable evidence to back up any claim before you make it. For fee comparisons, this means you can't just cherry-pick a few competitors and call it a day. You need a methodical approach that would hold up under regulatory review.

Truth in advertising laws require all promotional claims to be truthful and evidence-based (Truth in Advertising). The FTC's approach focuses on three key elements:

Competent Evidence: Your data needs to come from reliable sources. This typically means publicly available fee schedules, regulatory filings, or direct competitor research.

Reliable Methodology: You can't compare apples to oranges. Your fee comparison needs to account for similar service levels, client types, and account sizes.

Sufficient Sample Size: While the FTC doesn't specify exact numbers, your comparison should represent a meaningful portion of your competitive landscape, not just a handful of convenient examples.

The recent Cleo AI case shows how seriously the FTC takes substantiation requirements. The company was accused of deceiving consumers about the amount and speed of cash advances they could receive, and making it difficult for consumers to cancel its subscription service (FTC Alleges Fintech Cleo AI Deceived Consumers). The $17 million settlement serves as a stark reminder that inadequate substantiation can be extremely costly.

SEC Marketing Rule Requirements for Fee Claims

The SEC Marketing Rule adds another layer of complexity. The rule requires that advisers be able to substantiate any material statement in their marketing materials upon request. For fee comparisons, this means you need documentation that's immediately accessible and comprehensive.

The SEC is examining firms closely for compliance with the Marketing Rule (COMPLYing with the SEC Marketing Rule). The first SEC Marketing Rule Risk Alert, released on September 19, 2022, highlighted Marketing Rule Policies and Procedures, Substantiation Requirements, Performance Advertising Requirements, and Books and Records as key focus areas.

What makes the SEC Marketing Rule particularly challenging is its broad scope. One-on-one interactions with existing clients are generally excluded from the rule, which focuses on communications targeting prospects or multiple clients (SEC Marketing Rule Compliance: Essential Tips For RIAs). But pretty much everything else, including testimonials and endorsements, whether paid or unpaid, now falls under the advertisement umbrella.

The rule also requires that you maintain books and records supporting your marketing claims. This isn't just about having the data, it's about organizing it in a way that can be quickly retrieved and explained during an examination.

Step 1: Define Your Fee Comparison Scope

Before you start collecting competitor data, you need to clearly define what you're comparing. This seems obvious, but it's where many RIAs stumble. Your comparison needs to be specific enough to be meaningful but broad enough to represent your competitive landscape.

Service Level Matching: Are you comparing comprehensive wealth management fees or just investment management? Make sure you're comparing similar service offerings. A 1% fee for investment-only services isn't comparable to a 1% fee that includes financial planning, tax preparation, and estate planning.

Client Segment Definition: Fee structures often vary by client type and account size. Define whether you're comparing fees for high-net-worth individuals, mass affluent clients, or institutional accounts. Your comparison should reflect the client segments you actually serve.

Geographic Scope: If you serve clients nationally, your comparison should reflect national competitors. If you're a regional firm, focus on competitors in your geographic area. The FTC expects your comparison to be relevant to your actual market.

Time Frame: Fee schedules change. Establish a specific time frame for your comparison and document when you collected each data point. This becomes important if your claims are challenged months later.

Step 2: Identify Your Competitive Set

Your competitive analysis needs to include a representative sample of firms that prospects would realistically consider as alternatives. This typically includes:

Direct Competitors: RIAs with similar service offerings, client focus, and geographic presence. These are the firms you compete against most directly for new clients.

Indirect Competitors: This might include larger national firms, robo-advisors, or hybrid models that serve similar client segments, even if their business models differ.

Market Leaders: Include some well-known firms in your space, even if they're not direct competitors. Prospects often use these as benchmarks.

The key is balance. You need enough competitors to make your sample meaningful, but not so many that your analysis becomes unwieldy. Most substantiation experts recommend including at least 10-15 competitors for a robust comparison, though the exact number depends on your market size and competitive landscape.

Step 3: Collect Competitor Fee Data

This is where the rubber meets the road. You need reliable, current fee information from your competitors. Here are the most defensible sources:

Form ADV Part 2A: Every RIA must file this with the SEC, and it includes fee information. These filings are publicly available and represent the most reliable source of competitor fee data.

Public Websites: Many RIAs publish fee schedules on their websites. Screenshot these pages and save the URLs with timestamps. Website data can change, so document when you collected it.

Marketing Materials: Brochures, pitch books, and other marketing materials often include fee information. If you obtain these through legitimate means (trade shows, public presentations), they can support your analysis.

Third-Party Research: Some industry publications and research firms publish fee surveys. These can provide broader market context, though they may not be specific enough for direct comparisons.

What to Avoid: Don't rely on hearsay, outdated information, or data obtained through questionable means. The FTC and SEC expect your sources to be verifiable and current.

Step 4: Document Your Methodology

Your documentation needs to be thorough enough that someone else could replicate your analysis. This includes:

Data Collection Log: Create a spreadsheet that tracks each competitor, the source of their fee information, the date you collected it, and any relevant notes about their service offerings.

Comparison Framework: Document how you matched services across competitors. If Competitor A charges 1.2% for comprehensive wealth management and Competitor B charges 1.0% for investment management only, note these differences.

Calculation Methods: If you're averaging fees, calculating ranges, or making other mathematical adjustments, document your methodology. Show your work.

Assumptions and Limitations: Be transparent about any assumptions you made or limitations in your data. This actually strengthens your substantiation by showing you understand the boundaries of your analysis.

Step 5: Create Defensible Marketing Claims

Once you have your data, you need to translate it into marketing claims that are both compelling and defensible. Here's how to structure your claims:

Be Specific: Instead of "lower fees than competitors," try "our 0.85% fee is below the 1.1% average of 15 comparable RIAs in our market." Specificity makes your claim more credible and easier to substantiate.

Include Context: Explain what's included in your fee and how it compares to competitors. "Our 1.0% comprehensive wealth management fee includes financial planning, tax preparation, and estate planning services that many competitors charge separately."

Use Appropriate Qualifiers: Words like "many," "most," or "typically" can make your claims more defensible while still being compelling. "Our fees are typically 20-30% lower than comparable full-service RIAs."

Avoid Absolutes: Claims like "lowest fees in the industry" are almost impossible to substantiate comprehensively. Stick to claims you can actually prove.

Step 6: Implement Ongoing Monitoring

Fee substantiation isn't a one-time exercise. Competitor fees change, new competitors enter the market, and your own fee structure may evolve. You need systems to keep your substantiation current.

Quarterly Reviews: Set up a calendar reminder to review your fee comparison data quarterly. This doesn't mean you need to redo your entire analysis, but you should check for major changes in competitor pricing.

New Competitor Tracking: When new competitors enter your market, evaluate whether they should be included in your analysis. If they're significant players, you may need to update your substantiation.

Documentation Updates: Keep your substantiation documentation current. If you update your analysis, archive the old version but make sure your current marketing claims are supported by current data.

Compliance Integration: Make sure your compliance monitoring includes regular reviews of marketing claims and their substantiation. This is where AI-powered compliance tools can be particularly valuable for ongoing monitoring (RIA Compliance Software).

Technology Solutions for Fee Substantiation

Managing fee substantiation manually is time-consuming and error-prone. Modern compliance technology can streamline the process significantly.

Generative AI is transforming the financial services industry, particularly for registered investment advisory (RIA) firms (Future-proofing Your RIA with Generative AI: A Compliance Game Changer). AI can be used for automated process improvement, enhancing regulatory review, personalizing client communication, streamlining client onboarding, and fraud detection and threat mitigation.

For fee substantiation specifically, AI-powered tools can:

Automate Data Collection: AI can monitor competitor websites and regulatory filings for fee changes, alerting you when updates are needed.

Standardize Documentation: AI can help ensure your substantiation documentation follows consistent formats and includes all required elements.

Flag Compliance Risks: AI can review your marketing materials and flag potential issues with fee claims before they become problems.

Streamline Exam Preparation: When regulators request substantiation documentation, AI can quickly compile and organize the relevant materials.

The meaning of compliance involves an organization following the laws, regulations, and standards that govern its operations (Compliance Meaning). In the context of fee substantiation, this means having systems and processes that ensure your marketing claims are always backed by current, reliable evidence.

Common Pitfalls and How to Avoid Them

Even well-intentioned RIAs can stumble when substantiating fee claims. Here are the most common mistakes and how to avoid them:

Cherry-Picking Competitors: Don't just compare yourself to the most expensive competitors in your market. Your sample should be representative, including both higher and lower-cost alternatives.

Outdated Data: Fee schedules change regularly. Using year-old competitor data to support current marketing claims is a recipe for trouble. Keep your data current.

Apples-to-Oranges Comparisons: Make sure you're comparing similar services. A fee-only RIA's investment management fee isn't comparable to a commission-based advisor's fee structure.

Inadequate Documentation: "I know our fees are lower" isn't substantiation. You need documented evidence that would satisfy a skeptical regulator.

Overly Broad Claims: "Lowest fees in the industry" is almost impossible to substantiate. Stick to claims you can actually prove with your data.

Ignoring Service Differences: If your fee includes services that competitors charge separately, make sure your marketing materials explain this context.

Preparing for Regulatory Examinations

When regulators examine your fee substantiation, they're looking for evidence that you had a reasonable basis for your claims before you made them. Here's what they typically want to see:

Complete Documentation: Your substantiation file should include all source materials, methodology notes, and calculations. If you can't produce it, you probably can't substantiate it.

Current Information: Regulators expect your substantiation to be reasonably current. If you're making fee claims based on two-year-old competitor data, be prepared to explain why.

Reasonable Methodology: Your approach should make sense to an objective observer. You don't need a PhD in statistics, but your methodology should be logical and defensible.

Consistent Application: If you use a particular methodology for one fee comparison, you should use similar approaches for other claims. Inconsistency raises red flags.

An adviser's policies and procedures should reflect the firm's business model, including its compensation structure, services, client base, and operations (2023 Compliance Roundup Shows RIAs How to Steer Clear of Problems). This includes having clear procedures for substantiating marketing claims.

Building a Sustainable Substantiation Process

The goal isn't just to satisfy regulators, it's to build a sustainable process that supports your marketing efforts while managing compliance risk. Here's how to structure an ongoing substantiation program:

Assign Clear Responsibilities: Someone needs to own the substantiation process. This might be your CCO, marketing director, or a dedicated compliance professional. Make sure roles and responsibilities are clearly defined.

Create Standard Procedures: Document your substantiation process so it can be consistently applied across different marketing claims and by different team members.

Implement Regular Reviews: Schedule regular reviews of your marketing claims and their substantiation. This should be part of your annual compliance review process.

Maintain Organized Records: Your substantiation documentation should be organized and easily accessible. If you can't find it quickly, it's not useful during an exam.

Train Your Team: Make sure everyone involved in marketing understands the substantiation requirements. This includes marketing staff, business development professionals, and senior advisors who speak at conferences or write articles.

Regulatory compliance is concerned with the adherence to the laws and regulations that government agencies, such as the Securities and Exchange Commission (SEC), established for organizations within certain industries (Compliance Meaning). For RIAs, this includes ensuring that all marketing claims, including fee comparisons, are properly substantiated.

Sample Documentation Framework

Here's a practical framework for organizing your fee substantiation documentation:

Primary Documentation File

• Claim Statement: The exact marketing claim you're substantiating

• Analysis Date: When you conducted the analysis

• Methodology Summary: Brief overview of your approach

• Competitor List: All firms included in your analysis

• Data Sources: Where you obtained fee information for each competitor

• Calculations: Any mathematical analysis or averaging

• Conclusions: How your analysis supports your marketing claim

Supporting Materials

• Source Documents: Screenshots, Form ADV excerpts, marketing materials

• Data Collection Log: Detailed record of when and how you collected each data point

• Methodology Notes: Detailed explanation of your analytical approach

• Review History: Record of when you've updated or reviewed the analysis

Quality Control Checklist

• [ ] All competitors are clearly identified

• [ ] Data sources are documented and verifiable

• [ ] Collection dates are recorded

• [ ] Methodology is clearly explained

• [ ] Calculations are shown and verifiable

• [ ] Conclusions are supported by the data

• [ ] Documentation is organized and accessible

Integration with Broader Compliance Programs

Fee substantiation shouldn't exist in isolation. It should be integrated with your broader compliance and risk management programs. This includes:

Marketing Review Processes: Your marketing review should include substantiation verification. Before any marketing material goes live, someone should confirm that any claims are properly substantiated.

Annual Compliance Reviews: Include marketing claim substantiation in your annual compliance review. This is a good time to update analyses and ensure your documentation is current.

Exam Preparation: Your exam preparation checklist should include gathering substantiation documentation. Don't wait until regulators ask to organize these materials.

Training Programs: Include substantiation requirements in your compliance training. Make sure everyone understands what constitutes adequate substantiation.

The meaning of compliance in the finance industry has evolved over the United States' economic history (Compliance Meaning). Today's compliance programs need to be proactive, comprehensive, and technology-enabled to manage the complex regulatory environment effectively.

Looking Ahead: Future Trends in Marketing Compliance

The regulatory environment continues to evolve, and RIAs need to stay ahead of emerging trends:

Increased Scrutiny: Regulators are paying more attention to marketing claims, particularly in areas like fees and performance. The bar for substantiation continues to rise.

Technology Integration: AI and machine learning are becoming standard tools for compliance monitoring. Firms that don't adopt these technologies may find themselves at a disadvantage (Mitigate the Top Four Risks of Generative AI in Financial Services).

Real-Time Monitoring: The expectation is shifting from periodic reviews to continuous monitoring. Your substantiation processes need to keep pace with this trend.

Cross-Regulatory Coordination: The FTC and SEC are increasingly coordinating their enforcement efforts. Your compliance program needs to address both agencies' requirements simultaneously.

Final Thoughts: Building Confidence Through Compliance

Substantiating "lower fees than competitors" claims doesn't have to be a compliance nightmare. With the right approach, it becomes a competitive advantage that builds trust with prospects while protecting your firm from regulatory risk.

The key is treating substantiation as an ongoing business process, not a one-time compliance exercise. When you have robust, well-documented fee comparisons, you can market with confidence, knowing that your claims are backed by solid evidence.

In 2024 alone, the FTC sent $337.3 million in refunds to consumers harmed by unlawful practices (Truth in Advertising). Don't let your firm become part of that statistic. Invest in proper substantiation processes now, and you'll be prepared for whatever regulatory scrutiny comes your way.

The regulatory landscape will continue to evolve, but the fundamental principle remains constant: make claims you can prove, and be prepared to prove the claims you make. With proper substantiation, your fee advantages become powerful marketing tools that drive growth while maintaining regulatory compliance.

Managing marketing compliance at scale requires the right tools and processes. Luthor's AI-powered platform can automatically review your marketing assets for compliance issues, helping you catch potential problems before they become regulatory headaches. You can reduce the risk, effort, and time needed to tackle marketing compliance at scale with Luthor's comprehensive compliance monitoring and documentation capabilities. Ready to see how AI can streamline your marketing compliance process? Request demo access to explore how Luthor can help your RIA maintain compliant marketing while focusing on growth.

Frequently Asked Questions

What are the key requirements for substantiating "lower fees than competitors" claims under SEC Marketing Rule?

Under the SEC Marketing Rule 206(4)-1, RIAs must maintain substantiation for any fee comparison claims through documented evidence, including comprehensive competitor fee analysis, clear methodology for comparisons, and proper books and records maintenance. The rule requires that all marketing communications be based on factual information and that firms can demonstrate the basis for their claims during SEC examinations.

How do FTC truth-in-advertising standards apply to RIA fee comparison marketing?

The FTC requires that all advertising claims be truthful, not misleading, and substantiated with reliable evidence before making the claim. For RIA fee comparisons, this means having competent and reliable evidence supporting your "lower fees" assertion, ensuring claims aren't deceptive through omission of material facts, and maintaining documentation that a reasonable consumer would find convincing.

What documentation should RIAs maintain to support fee comparison claims?

RIAs should maintain comprehensive documentation including competitor fee schedules and analysis, methodology used for fee comparisons, time-stamped data collection records, and client segment definitions used in comparisons. This documentation must be readily available for regulatory examination and should demonstrate that the comparison methodology is fair, accurate, and not misleading to potential clients.

Can RIAs use generative AI tools to help substantiate fee comparison claims while maintaining compliance?

Yes, generative AI can assist RIAs in compliance processes including automated data collection, regulatory review enhancement, and documentation management for fee comparisons. However, firms must ensure proper oversight of AI-generated content, maintain human review processes, and verify that AI tools don't introduce compliance risks or inaccuracies in their substantiation efforts.

What are the potential penalties for making unsubstantiated fee comparison claims?

Penalties can be severe, with recent FTC enforcement actions like the Cleo AI $17 million settlement demonstrating regulatory focus on misleading financial services marketing. RIAs face potential SEC enforcement actions, monetary penalties, censure, and reputational damage. The stakes are particularly high given that consumer fraud losses topped $12.5 billion in 2024, making regulators increasingly vigilant about marketing claims.

How often should RIAs update their fee comparison substantiation to maintain compliance?

RIAs should regularly update their fee comparison substantiation, ideally quarterly or whenever market conditions change significantly. The SEC's annual review requirements for policies and procedures suggest that substantiation should be part of ongoing compliance monitoring. Firms should also update documentation when competitors change their fee structures or when the firm's own fee schedule changes.