Jeff Benjamin
6 min read
Can we offer you estate- and tax-planning services on the house?
Financial advisors aren’t immune to the fee compression that’s been spreading across the broader financial services industry. And that’s forcing advisors to offer more services to clients – and to get just a little bit creative. While the higher profile price wars that have cut expense ratios on mutual funds and ETFs ultimately benefit financial advisory clients, increasingly savvy consumers are now applying direct and indirect fee pressure on the advisors charged with putting clients first.
According to research conducted by Cerulli Associates, the popularly quoted 1% advisory fee is becoming more of a myth than a reality as advisors cut fees and increase services to recruit and keep clients in an increasingly competitive field.
“It’s the one-two punch of fee pressure and demand for more services, and competition for wealthier clients is driving down those fees,” said Andrew Blake, Cerulli’s associate director of wealth management. By next year, 83% of financial advisors will be charging less than 1% on assets under advisement for clients with more than $5 million in investable assets, according to the research.
And, for those clients with more than $10 million, the average fee is expected to be around 66 basis points. Meanwhile, for those clients with portfolios in the $100,000 range, the average fee is holding at around 1.25%, according to Cerulli. Abby Salameh, chief growth officer at RFG Advisory, described advisory fees as a “big topic.”
“We see it all the time,” she said. “Advisors are being asked to deliver more services than ever before, from tax planning to estate planning, mortgage research, car leases, emotional coaching for intergenerational wealth, college-aged children, financial literacy and beyond.”
READ ALSO: Morningstar’s CEO Kunal Kapoor on Private Assets and ‘Extracting Gold’ and Succession Planning Vacuum Risks Alienating RIA Clients, Next-Gen Leaders
For financial advisors, the pickle of lower fees and more services is virtually unavoidable against a backdrop of rolling fee wars on the product side. “Advisors are resistant to asking their clients for a fee increase,” Salameh said. “At the same time, there are more investors that will be seeking financial guidance, and the online tools and services available through platforms like Vanguard are incredibly inexpensive.”
Michael Becker, a partner at Toberman Becker Wealth, said the pressure is on advisors to “strike the right balance between competitive fees and robust service offerings.”
