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How — and What — Top Advisors Charge Their Clients

By Rita Raagas De Ramos February 24, 2020

More than 80% of top-ranked advisors set client fees as a percentage of account assets, though often that's in conjunction with commissions or flat planning fees, data from Ignites Research shows.

But as many as 12% of registered investment advisors and 7% of broker-dealer reps rely solely on flat fees or hourly pricing structures, according to the survey of 471 advisors.

The newly released data comes as advisors, forced to fight fee pressures, say they've started to rethink their pricing models and get more creative.

“I’d rather be a competitive choice for an investor,” Brian Vendig, president and managing executive of Farmington, Conn.-based MJP Wealth Advisors, told Financial Advisor IQ in August. “I don’t want pricing to stand in the way.”

(Story continues below table.)

Among those who do charge asset-based fees, RIAs tend to command a bit more than their broker-dealer brethren: 82 basis points versus 79 bps, according to Ignites Research.

Respondents included advisors listed in the Financial Times 400 list of top broker-dealer reps and the FT 300 list of top RIAs. In all, 292 brokers and 179 RIAs participated.

Ignites Research, which is a sister service to Financial Advisor IQ, scores top advisors according to six criteria: client assets, growth in client assets, years in existence, advanced industry credentials, online accessibility and compliance records.

B-Ds: 0.79%; RIAs: 0.82%
Effective average percentage charged in asset-based fee arrangements

At MJP Wealth Advisors, Vending says the firm has four service models, each with its own fee program, to ensure that "the fee that’s being charged is appropriate for the level of service we’re providing.” (See table below showing for which services top advisors most commonly charge flat or hourly rates.)

One of MJP's models a primarily online service that's similar to a robo-advisor, but includes human advisor support that helps forge a relationship with the client.

The second option is pure investment management, while the third is a wealth management service that involves a “very high-touch client experience with additional concierge services,” Vendig said.

Finally, the fourth is a financial planning service that charges a flat or hourly fee, depending on the client’s needs.

The firm’s online service accounts are typically below $100,000 in size versus the other services’ typical account sizes of between $1 million and $30 million.

For the online service, MJP Wealth Advisors charges an asset-based fee of 30 basis points, regardless of the client’s account size, which Vendig in August described as “a reasonable level to start.”

For the investment management-only and wealth management services, most clients pay an annual asset-based fee that is, on average, less than 1% of account assets, Vendig says.

The financial planning service walks clients through retirement planning, estate planning, tax planning, and/or medicare planning, depending on their individual needs and specific services the client requires.

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Tags:  Finding and winning new clients , Client retention , Technology , Fees and compensation , Investment strategies , Portfolio management

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Social States Feb. 24, 2020 at 05:17 PM EST

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“I don’t want pricing to stand in the way.” Really? As the fees drop, assets have to increase which means service drops also. The end game of this course is computers making all the decisions. If computers make all the decisions and make the same choices even with varying percentages, chaos will eventually occur in the markets.