Reducing Client Fees & Increasing Competitiveness
Investment Advisor Representative working through another Registered Investment Advisory Firm paying above average fees
Challenge
- The Investment Advisor Representative was working through another Registered Investment Advisory Firm that charged a client fee of 2.52%.
- The breakdown of fees was 0.75% to the third party money manager, 0.77% to the Registered Investment Advisor, 1% to the Advisor Representative.
- With a total fee of 2.52%, the Advisor Representative failed to stay competitive in a market where client fees typically range from 1-2%.
Solution
- Practice Management Group offered the Investment Advisor Representative access to a platform of third-party managers with significantly lower fees.
- The new break down was 6-10 basis points for third-party manager fees, a laddered 5-30 basis points for the Registered Investment Advisory fees, and his 1% Advisor Representative fee.
- 25% total cost to his clients, including the underlying investments.
Outcome
Lower Overall Costs
Advisor Representative benefited from a substantial reduction in fees, decreasing from 2.52% to 1.25%.
Increased Competitiveness
Representative could now compete more effectively in the market with a total fee well within the industry standard of 1-2%.
Flexibility in Pricing
The advisor retained the ability to adjust their fees while still keeping overall client costs low. This flexibility could potentially increase the advisor’s revenue while maintaining client satisfaction.
Client Satisfaction
Lower fees directly benefit clients, leading to higher satisfaction and loyalty. Satisfied clients are more likely to provide referrals, further growing the advisor’s business.
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