Wealth management clients want clearer and more reasonable pricing, but many don’t understand what they’re paying for, according to a Hearts & Wallets report.
“Customers of most firms are improving in understanding of how firms earn money, but still many customers don’t know how they are buying financial products and services,” according to Laura Varas, CEO and founder of Hearts & Wallets.
For example, many customers report they pay “nothing” for services and products, but even “free” products can have underlying costs or commercialization of consumer data, the market research firm notes.
Understandable and reasonable fees are top “wants” among investors surveyed by Hearts & Wallets in August 2020. For respondents with $500,000 to $2 million in investable assets, getting unbiased advice that puts their best interest ahead of that of their wealth manager is slightly more important.
Despite being a top want, pricing clarity is not there for most clients, and customer confusion is actually rising, according to Hearts & Wallets.
In 2017, customers were unclear about pricing in 68% of savings, investing and advice relationships, the firm says. Last year, such confusion permeated nearly 75% of relationships — with 44% of customers saying they don’t know how they pay, and 29% saying they believe financial solutions are free, the firm adds.
The study also shows that customers understand service-based pricing better than product-based pricing.
“Consumer confusion about pricing of financial products and services is an unsustainable industry dynamic,” Varas says.
“The firms that can figure out how to present their value proposition and communicate explicit buying decisions will emerge as leaders. Overall, firms still have much work to simplify pricing, enhance communication and support consumer education in financial fluency,” she adds.
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