Fees for transaction-based services will continue to fall as fund managers go direct and the financial planning industry builds on the service concept, says Skip Parish from GBST.
Fees for transaction-based services will continue to fall as fund managers go direct and the financial planning industry builds on the service concept, says Skip Parish from GBST.
“The real worth in financial planning is going to be advice,” he says. “Finan-cial planning is coming of age and is recognised for its intrinsic value in helping clients.”
In the US, fee-for-service income is predicted to grow by 20 per cent this year, while transaction fees will fall by almost 15 per cent. In 2003, the fee-for-service income is predicted to grow by 15 per cent, while transaction fees will fall by 15 per cent. By 2003, transaction revenue is expected to be only $US15 billion of planners’ total income with fee-for-service accounting for $US55 bil-lion. Last year, the two types of fee were almost equal at $US30 billion.
The arrival of online supermarket of funds are affecting the way financial plan-ning products are delivered and that, in turn, is impacting on fees, Parish says.
These supermarket products allow the manufacturer to spread the fees internally, usually by a mass offering over the Internet or through a call centre. The prod-ucts tend to be offered outside the financial planning industry in the US, Par-ish says.
This type of product is leading to new types of products arriving in Australia – direct holding accounts.
These products will not need a prospectus, exceptions and client mandates are allowed and will have flexibility to switch management styles. There will be more global coverage of investment styles. Planners will be able to share fees with institutions.
In the US, the direct plans are expected to be worth $US25 billion by 2003, com-pared to just $US5 billion last year.
Parish sees these direct plans being sold by financial planners, with subsequent reporting and servicing online. The consolidated reporting will include details from a variety of sources such as bank accounts, direct shares and real estate.
“This technology is an extension of the planner’s practice and is going to be little threat to their businesses,” he says.
It is expected four direct plans will be launched by brokers in Australia during the next 12 months.
