Displaying items by tag: fees

(New York)

Don’t worry, this is a not a story about DOL rule resurrection. The rule remains all-but-dead. This article is about how despite the rule being effectively gone, it has succeeded in completely changing the industry. The famed Michael Kitces summarized the DOL rule’s effect this way, saying “The DOL fiduciary rule really made the discussion of fiduciary for consumers mainstream … You can’t un-ring that bell”. Barron’s focuses on the material changes to offerings in their view, saying “The short-lived standard spurred the industry to lower fees, and prompted brokerages to prune their product lineups and remove conflicts of interest from their compensation structures. These changes are expected to outlive the rule”.

FINSUM: The DOL rule may be gone, but it will certainly never be forgotten.

(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.

(New York)

There is a lot of scuttlebutt in the wealth management industry about fee compression. The narrative is that there is much price competition across the industry and investment advisors are having to cut their fees and add services to stay relevant. Well, the reality is fees are actually moving higher. According to a new survey from FinancialAdvisor, many advisors are actually hiking fees between 10 to 25 basis points. The finding adds to another survey from Pershing which found that 84% of advisors had not changed fees in 2017, and those that did had hiked rather than cutting.

FINSUM: This is a very healthy sign for the industry, especially given the fee war going on in ETFs and the asset management industry.

(New York)

Individual bond sales to retail clients may be about to take a hit. The reason why is a new set of rules being enacted on brokers that require them to disclose the price at which they bought bonds before they sell them to clients (if it occurs on the same day). The idea of the rule is to give investors a clear idea of the price they are paying for bonds. Brokers are worried that the new rule will cut into their fees and lead investors to stop buying bonds in favor of bond funds.

FINSUM: So we understand the thrust of this rule, but as a counterargument, we ask our readers to consider: what other industries have to disclose their margins to customers during a transaction? When you buy a new iPhone, does apple need to say they have a 90% margin on the phone?

(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.