Wealth Management

(New York)

If there was ever a stat that really represented the big changes underway in the wealth management industry, it is this one: a new survey shows that broker-dealers are earning more revenue from fees than they are commissions. That is a major shift for the group, who until recently existed mostly as commission engines. The stat also reflects the growing trend towards dually-registered B-D/RIAs, allowing advisors to perform both functions.

FINSUM: The regulatory trend and customer trend is moving towards fee-based payment. This stat reflects just how pervasive the model is becoming.


One of the most contested parts of the 2010 Dodd-Frank legislation was the legal mandate the act gave to regulators to create pay caps for Wall Street. The industry has fought tooth and nail to block their imposition, successfully curbing any changes for nine years. The last major push to cap pay was in 2016, but nothing has happened since then. Now a consortium of regulators, including the Fed, FDIC, and the Office of the Comptroller of the Currency and Federal Reserve are coming together to create new rules. The most likely target are high ranking executives, but talks in the past have extended to rank and file employees.

FINSUM: Caps for top executives will be anathema to some, but restrictions for regular employees are a whole other issue that will cause a major uproar.

(New York)

Fund fees are a hot area, and not just in terms of them falling in absolute terms. While everyone is aware of Fidelity’s new zero fee index funds and the price war going on in top line fees, there are also new and interesting fund structures emerging. One kind of new fee model is called a fulcrum structure, where fees are low (ETF-like) unless the funds outperforms its benchmark, in which case the provider gets a performance fee. This kind of structure is more popular with mutual funds and can offer the best of both worlds—low fees for ordinary performance, or outperformance that comes with active management.

FINSUM: We think these kinds of funds offer a better alignment of interest while offering multi-sided benefits. However, the risk is that managers are incentivized to take excess risk in an effort to boost performance over the fulcrum threshold.

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