Displaying items by tag: fees

(New York)

Well it didn’t look like it would be a great year for bonuses, but 2017 bonus data is just in and it was a good year for the industry. Bonuses were up a whopping 17% this year and nearly eclipsed their pre-Crisis levels for the first time. The big bonuses largely reflected the growth of the leveraged loan market, which boosted fees across the industry. The New York state comptroller makes a good point about the data, saying “The large increase in profitability over the past two years demonstrates that the industry can prosper with the regulations and consumer protections adopted after the financial crisis”.

FINSUM: With bonuses getting to near pre-Crisis levels, it seems to be another sign that things are getting toppy.

(New York)

The big question mark for advisors is whether they will need to keep cutting their fees in an effort to make themselves competitive with robo advisors. Bolstering additional services is another way to defend fees, but getting credit for these is difficult. Therefore, advisors might want to adopt an approach Ron Carson, from the Carson Group, uses. That method is to send clients not only an investment performance report, but also a “relationship timeline”, which shows all the services you have provided them, such “as the sale of a business or the analysis of expected Social Security benefits”, but could also including helping find mortgages, assisting with travel etc.

FINSUM: People are always very price-oriented and it becomes very easy for clients to forget just how much an advisor does. This seems like a good way to highlight it.

(San Francisco)

In what looks like a continuation of the recent meltdown of the Wells Fargo brand, a new scandal has come to light. The company is having several senior executives resign as a new Justice Department investigation is underway into bad practices in its wealth management unit. The accusations surround overcharging customers and inappropriate advice to wealth management clients.

FINSUM: Who knows how big this one might blow up? The scandal in its core banking business had not really affected the wealth management unit so far, but that may change.

(New York)

Despite the rise of ETFs over the last few years and the weak performance of hedge funds, on average, one of the astounding things in asset management has been the staying power of the latter. Hedge funds long had a “2% and 20%” fee structure as standard, and while most discount a bit from there nowadays, fees are still very high—hundreds of times low-priced ETFs and mutual funds. Bloomberg explains that a big part of that fee goes into paying the brokers that recommend the funds. The payments go by all sorts of names, such as placement fees, payment for shelf space, and retrocessions, but the fact is they boost costs to investors.

FINSUM: Bloomberg tries to make this look dirty, but the reality is that referral fees are standard in many industries. The big question in this area is where this type of arrangement falls when the SEC debuts its new fiduciary rule?

(New York)

The march downward in ETFs fee has been unstoppable. Over the last few years the fee war between providers, combined with increasing AUM, has driven down fees to almost negligible levels on many of the most popular ETFs. Now, it looks like free ETFs are on the way, or even ones that pay the holder. In the next year, it seems likely that free or negative fee ETFs will debut. This is possible because providers have huge economies of scale as well as good sources of non-fee income from running the funds, such as lending the securities out.

FINSUM: It is sort of amazing that it may be economical to run free or negative fee ETFs, but it seems like an inevitable outcome to the current fee war.