Displaying items by tag: AUM
Why You Shouldn’t Lower Your Fees
(New York)
A lot of advisors have been under pressure to cut their fees. Pressure from competition, both digital and human, has reportedly put downward pressure on the fees advisors feel they can charge. However, Barron’s has put out a piece arguing that advisors should not cut their fees. The reason why stems from the results of a survey which found that advisors who lowered their fees actually brought in less assets and experienced less revenue growth than when they left fees higher. An industry commentator summarized the situation this way, saying “That supports something we’ve seen, frankly, for 15 years, which is, clients don’t leave because of price; they leave because of service issues”.
FINSUM: We think this is a bit of a misleading survey, at least if you buy the “services issues” theory. The reason why is that it is only advisors who have service issues that are cutting fees, which means the lower asset growth does not really have to do with fees, it has to do with a problem with the advisor.
Fidelity is Bringing a Big Shakeup to Fees
(New York)
Fidelity, one of the largest US wealth managers, is shaking up its fees, and not just in small pockets of the business. The company is moving to a single unified fee schedule that works entirely by how much assets under management a client has with Fidelity. Existing clients will have their fees frozen so as to avoid paying more, but for many, services will cost less than before, while in certain areas they will cost more. Fidelity is also cutting the cost of its robo advisor to 0.35%.
FINSUM: This is happening across the industry, and this sort of move was led by Merrill in 2016. Nonetheless, it is a pretty significant change.
M&A Review for Advisors
(New York)
It as another solid year for RIA M&A. Just as in 2016, there was strong deal flow, and the number of transactions closed was exactly the same in 2017 as the year prior. That said, deal size and total AUM declined. The first half of 2017 was significantly stronger than the second half, with the majority of the year’s 94 deals getting done in the first half. TD Ameritrade says distraction from tax reform in the second half of the year was partly to blame for the decline in momentum. Total AUM acquired was $106 bn, and the average transaction size was $1.13 bn.
FINSUM: These look like pretty pretty strong numbers to us. The market still seems to be ripe for further consolidation.