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Adapting Fee Structures to Meet Shifting Investor Expectations


Are you one of the 52% of advisors who have changed their fee structure within the past four years? Fees at a Crossroads Revisited, published by the SEI Advisor Network, provides valuable insights for those evaluating their fee structure. Their research has revealed a notable shift in the attitudes of both advisors and consumers.

Many consumers seek services that reach beyond traditional investment management. More than 80% of the survey respondents indicated that they value financial planning at least as much as they value investment management services. As advisors add new services beyond traditional wealth management they must evaluate their compensation methods. With 24% of consumers not understanding how their financial advisor is compensated, this can be increasingly difficult as advisors attempt to prove the value of their services.

Also Read: Financial Wellness: Opportunity or Current Fad? 

Traditionally, financial advisors relied on commissions for compensation. By 2015, fee structures were much more diverse. The study cites significant growth in project-based and hourly fees; over a three year period up to 32% of advisors added this model compared to 1.4% in 2015. Retainers are also growing in popularity, in use by 24% of advisors from 15%. Changes will persist as advisors do their best to educate clients on the value of their services.

Some advisors may not currently feel the need to adjust their fee structure, but as their senior retirees reap the rewards of well-planned investing, new clients will have to fill their shoes. While there has been slight growth in the last 4 years in the percentage of those willing to pay for investment advice (from 51% to 57%), advisors face growing competition from investors attempting to manage their assets on their own through the use of online tools.

One of the report’s key takeaways is the need for advisors to know—and be able to communicate—their true value. The authors suggest four ways to clarify that value for both advisors and their future clients:

  1. Formalize your client-centric business strategies.
  2. Engineer your firm’s operating models to deliver valued capabilities.
  3. Articulate your differentiated services.
  4. Show what the value is and price add-on services appropriately.

Helping Americans manage their finances and position themselves to retire with confidence is a worthy calling. It is what fuels RetireReady Solutions to equip advisors with the tools they need to excel at their job. Quality advisors who are equipped to meet the shifting needs and demands of investors will shape the future of the industry.

by Edward Dressel

With a long history of working with corporate accounts of all sizes RetireReady Solutions will draw on our experience to help your advisors increase their sales through client education.

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