Asset-based fees – what would advisers do without them?
New research has confirmed the continuing centrality of asset-based fees for financial advisers, particularly with respect to mid-tier clients.
The research, to be presented to today's Money Management Future of Wealth Management Conference in Sydney reveals the challenges advisers will face if they are forced to totally abandon asset-based fees and adopt an hourly fee model.
The research, conducted through August, shows that while advisers have comfortably reached hourly and sometimes yearly fee models with their high net worth clients, asset-based fees are the preferred method with respect to mid-tier or low balance clients.
The survey showed that an annual fee was the dominant choice with respect to high net worth clients, with around 60% of respondents choosing this method, while asset-based fees dominated with respect to clients who were described as “medium-value” or “low-value”.
Importantly, the survey revealed that hourly fees appeared to be the least favoured option for advisers across all client types, albeit that around 12% of advisers used hourly fees when dealing with low value clients.
The Money Management research has also revealed that advisers expect to be servicing fewer but high value clients in the post-Royal Commission environment.
The future of asset-based fees remain under a cloud with the Royal Commissioner, Kenneth Hayne, suggesting that they appeared to have been an attempt to replicate the revenue stream that flowed from a combination of upfront and trailing commissions.
Recommended for you
Compared to four years ago when the divide between boutique and large licensees were largely equal, adviser movements have seen this trend shift in light of new licensees commencing.
As ongoing market uncertainty sees advisers look beyond traditional equity exposure, Fidante has found adviser interest in small caps and emerging markets for portfolio returns has almost doubled since April.
CoreData has shared the top areas of demand for cryptocurrency advice but finds investors are seeking advisers who actively invest in the asset themselves.
With regulators ‘raising the bar’ on retirement planning, Lonsec Research and Ratings has urged advisers to place greater focus on sequencing and longevity risk as they navigate clients through the shifting landscape.
