Displaying items by tag: fees

(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.

(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.