Asset based fees – a thing of the past

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Summary: Over 60% of today’s wealth customers expect to pay flat fees, yet the industry overwhelmingly charges asset based fees (only 11% feel this is appropriate).  This was probably a more comfortable approach for advisers when transitioning from commission to fee based compensation and probably easy enough to rationalise to customers moving away from commissions to an approach that at least gave them more control.  But with customers doing it tougher, all prior arrangements are now under scrutiny and asset based fees may create retention pressures.  Only 10% of customers are willing to consider switching advisers, so those seeking to bring new customers into their business will have to target younger consumers who have little experience with commissions and low asset bases.  Even if they were prepared to go down the asset based route, the rates currently being applied would not cover the advisers costs and increases could generate percentage rates that would look usurious.  It seems that whichever way you look at it, asset based fees have had their day.  Click here to download the full article from Professional Planner September Issue.

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