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Advisor Group Cutting Wrap Account Pricing Before Year's End

By Peter Rawlings November 6, 2020

Advisor Group is cutting fees on its wrap accounts by up to 50% in a bid to support their FAs’ fee-based relationships and help eliminate conflicts.

The pricing will start at nine basis points, or as low as three bps for larger accounts, according to a person with knowledge of the change. Exact cutoffs for price breaks for the portfolios are determined by a range of factors, with no specific breakpoint, the person says, without elaborating.

The pricing change will take place before the end of the year, the person says.

“We are focused on supporting the ability of our financial professionals to serve their clients in a fee-based relationship, which is where the future of wealth management is heading,” Advisor Group CEO Jamie Price says in a statement.

“In contrast, we believe advisor ticket charge structures are increasingly tired and outdated,” he says.

The lower fees for wrap accounts, or advisor-managed portfolios, are also aimed at reducing conflicts of interest by eliminating conflicts stemming from trading costs, Price says.

One of the most worrisome sources of conflicts of interest is “how opaque no transaction fee programs are in the clearing apparatus of our business, and how those costs get passed through to advisors and clients,” Price says.

“Put simply, currently, self-clearing firms are playing both sides — and that creates intrinsic problems for advisors and clients alike,” he adds.

Price says many self-clearing firms charge fund families higher revenue-sharing fees to enable zero transaction costs. That creates large disparities in fund cost and incentivizes fund families to pay more to try to ensure their funds’ use, he says.

Advisor Group, which serves roughly 11,000 financial professionals, switched to a flat ticket charge structure several years ago, and has eliminated revenue sharing programs tied to no-transaction fee arrangements, Price notes.

The pricing change was first reported by InvestmentNews.

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Tags:  Fees and compensation , Regulatory/legal issues , Portfolio management , Advisor Group

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